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WILLIAM  ROY  SMITH 
MARION  PARRIS  SMITH 


a   small    house  and   large   garden, 
....a  few  friends   and   many  books 


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THE  AGE  OF  BIG  BUSINESS 


ABRAHAM  LINCOLN  EDITION 

•  • 

VOLUME  39 

THE  CHRONICLES 

OF  AMERICA  SERIES 

ALLEN  JOHNSON 

EDITOR 

GERHARD  R.  LOMER 

CHARLES  W.  JEFFERYS 

ASSISTANT  EDITORS 


THE  AGE 
OF  BIG  BU 

A  CHRONIC 
CAPTAINS  OF 
BY  BURTON  J.  HE 


RICK 


NEW  HAVEN:  YALE  UN 

>W.  BROOK  Ic  CO. 
LONDO 
OXFORD 


ORD 


CORNELIUS  VANDERB1LT 

Engraving  from  a  photograph  by  Gurney,  New  York. 


THE  AGE 
OF  BIG  BUSINESS 

* 

A  CHRONICLE  OF  THE 

CAPTAINS  OF  INDUSTRY 

BY  BURTON  J.  HENDRICK 


NEW   HAVEN:   YALE   UNIVERSITY   PRESS 

TORONTO:   GLASGOW,    BROOK    &   CO. 

LONDON:    HUMPHREY    MILFORD 

OXFORD    UNIVERSITY    PRESS 

1919 


Copyright,  1919,  by  Yale  University  Press 


CONTENTS 

I.     INDUSTRIAL   AMERICA   AT  THE  END   OP 

THE  CIVIL  WAR  Page      1 

II.     THE  FIRST  GREAT  AMERICAN  TRUST  "      25 

IH.    THE  EPIC  OF  STEEL  "      58 

IV.     THE  TELEPHONE:  AMERICA'S  MOST  POET- 

ICAL  ACHIEVEMENT  "      86 

V.     THE    DEVELOPMENT    OF    PUBLIC     UTIL 
ITIES  "     119 

VI.     MAKING    THE    WORLD'S    AGRICULTURAL 

MACHINERY  "     149 

VII.     THE   DEMOCRATIZATION   OF   THE   AUTO 
MOBILE  "     170 

BIBLIOGRAPHICAL  NOTE  "     189 

INDEX  "     191 


vii 


ILLUSTRATIONS 

CORNELIUS  VANDERBILT 

Engraving  from  a  photograph  by  Gurney, 

New  York.  Frontispiece 

JOHN  D.  ROCKEFELLER 

Painting  by  John  S.  Sargent.  Facing  page     82 

ANDREW  CARNEGIE 

Photograph  by  Underwood  &  Underwood.        "         "         66 

ALEXANDER  GRAHAM  BELL 

Photograph  by  Harris  &  Ewing,  Washington.    "         "         94 

McCORMICK'S  FIRST  REAPING  MACHINE. 

Wood  engraving  in  Mechanic's  Magazine  and 
Register  of  Inventions  and  Improvements,  Octo 
ber.  1834. 
CYRUS    H.    McCORMICK.       Daguerreotype 

taken  about  1839.  "         "       164 


THE  AGE  OF  BIG  BUSINESS 

•      • 
• 

CHAPTER  I 

INDUSTRIAL  AMERICA  AT  THE  END  OF  THE  CIVIL  WAR 

A  COMPREHENSIVE  survey  of  the  United  States,  at 
the  end  of  the  Civil  War,  would  reveal  a  state  of 
society  which  bears  little  resemblance  to  that  of 
today.  Almost  all  those  commonplace  fundamen 
tals  of  existence,  the  things  that  contribute  to 
our  bodily  comfort  while  they  vex  us  with  economic 
and  political  problems,  had  not  yet  made  their 
appearance.  The  America  of  Civil  War  days 
was  a  country  without  transcontinental  railroads, 
without  telephones,  without  European  cables,  or 
wireless  stations,  or  automobiles,  or  electric  lights, 
or  sky-scrapers,  or  million- dollar  hotels,  or  trolley 
cars,  or  a  thousand  other  contrivances  that  today 
supply  the  conveniences  and  comforts  of  what  we 

call  our  American  civilization.     The  cities  of  that 

l 


S  THE  AGE  OF  BIG  BUSINESS 

period,  with  their  unsewered  and  unpaved  streets, 
their  dingy,  flickering  gaslights,  their  ambling 
horse-cars,  and  their  hideous  slums,  seemed  ap- 
propriate  settings  for  the  unformed  social  life  and 
the  rough-and-ready  political  methods  of  American 
democracy.  The  railroads,  with  their  fragile  iron 
rails,  their  little  wheezy  locomotives,  their  wooden 
bridges,  their  unheated  coaches,  and  their  kero 
sene  lamps,  fairly  typified  the  prevailing  frontier 
business  and  economic  organization.  But  only  by 
talking  with  the  business  leaders  of  that  time  could 
we  have  understood  the  changes  that  have  taken 
place  in  fifty  years.  For  the  most  part  we  speak  a 
business  language  which  our  fathers  and  grand 
fathers  would  not  have  comprehended.  The  word 
"trust"  had  not  become  a  part  of  their  vocabulary; 
"restraint  of  trade"  was  a  phrase  which  only  the 
antiquarian  lawyer  could  have  interpreted;  "in 
terlocking  directorates,"  "holding  companies," 
"subsidiaries,"  "underwriting  syndicates,"  and 
"community  of  interest"  —  all  this  jargon  of 
modern  business  would  have  signified  nothing  to 
our  immediate  ancestors.  Our  nation  of  1865  was 
a  nation  of  farmers,  city  artisans,  and  industrious, 
independent  business  men,  and  small-scale  manu 
facturers.  Millionaires,  though  they  were  not 


AT  THE  END  OF  THE  CIVIL  WAR         3 

unknown,  did  not  swarm  all  over  the  land.  Lux 
ury,  though  it  had  made  great  progress  in  the  latter 
years  of  the  war,  had  not  become  the  American 
standard  of  well-being.  The  industrial  story  of  the 
United  States  in  the  last  fifty  years  is  the  story  of 
the  most  amazing  economic  transformation  that 
the  world  has  ever  known;  a  change  which  is  fitly- 
typified  in  the  evolution  of  the  independent  oil- 
driller  of  western  Pennsylvania  into  the  Standard 
Oil  Company,  and  of  the  ancient  open  air  forge  on 
the  banks  of  the  Allegheny  into  the  United  States 
Steel  Corporation. 

The  slow,  unceasing  ages  had  been  accumulating 
a  priceless  inheritance  for  the  American  people. 
Nearly  all  of  their  natural  resources,  in  1865,  were 
still  lying  fallow,  and  even  undiscovered  in  many 
instances.  Americans  had  begun,  it  is  true,  to 
exploit  their  more  obvious,  external  wealth,  their 
forests  and  their  land;  the  first  had  made  them  one 
of  the  world's  two  greatest  shipbuilding  nations, 
while  the  second  had  furnished  a  large  part  of  the 
resources  that  had  enabled  the  Federal  Govern 
ment  to  fight  what  was,  up  to  that  time,  the  great 
est  war  in  history.  But  the  extensive  prairie  plains 
whose  settlement  was  to  follow  the  railroad  exten 
sions  of  the  sixties  and  the  seventies  —  Kansas, 


4  THE  AGE  OF  BIG  BUSINESS 

Nebraska,  Iowa,  Oklahoma,  Minnesota,  the  Dako- 
tas  —  had  been  only  slightly  penetrated.  This 
region,  with  a  rainfall  not  too  abundant  and  not 
too  scanty,  with  a  cultivable  soil  extending  from 
eight  inches  to  twenty  feet  under  the  ground,  with 
hardly  a  rock  in  its  whole  extent,  with  scarcely  a 
tree,  except  where  it  bordered  on  the  streams,  has 
been  pronounced  by  competent  scientists  the  finest 
farming  country  to  which  man  has  ever  set  the 
plow.  Our  mineral  wealth  was  likewise  lying  every 
where  ready  to  the  uses  of  the  new  generation. 
The  United  States  now  supplies  the  world  with  half 
its  copper,  but  in  1865  it  was  importing  a  consider 
able  part  of  its  own  supply.  It  was  not  till  1859 
that  the  first  "oil  gusher"  of  western  Pennsylvania 
opened  up  an  entirely  new  source  of  wealth. 
Though  we  had  the  largest  coal  deposits  known  to 
geologists,  we  were  bringing  large  supplies  of  this 
indispensable  necessity  from  Nova  Scotia.  It  has 
been  said  that  coal  and  iron  are  the  two  mineral 
products  that  have  chiefly  affected  modern  civil 
ization.  Certainly  the  nations  that  have  made  the 
greatest  progress  industrially  and  commercially 
—  England,  Germany,  America  —  are  the  three 
that  possess  these  minerals  in  largest  amount. 
From  sixty  to  seventy  per  cent  of  all  the  known 


AT  THE  END  OF  THE  CIVIL  WAR        5 

coal  deposits  in  the  world  were  located  in  our  na 
tional  domain.  Nature  had  given  no  other  nation 
anything  even  remotely  comparable  to  the  four 
hundred  and  eighty  square  miles  of  anthracite  in 
western  Pennsylvania  and  West  Virginia.  Enor 
mous  fields  of  bituminous  lay  in  those  Appalachian 
ranges  extending  from  Pennsylvania  to  Alabama, 
in  Michigan,  in  the  Rocky  Mountains,  and  in  the 
Pacific  regions.  In  speaking  of  our  iron  it  is 
necessary  to  use  terms  that  are  even  more  extrava 
gant.  From  colonial  times  Americans  had  worked 
the  iron  ore  plentifully  scattered  along  the  Atlan 
tic  coast,  but  the  greatest  field  of  all,  that  in 
Minnesota,  had  not  been  scratched.  From  the 
settlement  of  the  country  up  to  1869  it  had  mined 
only  50,000,000  tons  of  iron  ore;  while  up  to  1910 
we  had  produced  685,000,000  tons.  The  streams 
and  waterfalls  that,  in  the  next  sixty  years,  were 
to  furnish  the  power  that  would  light  our  cities, 
propel  our  street-cars,  drive  our  transcontinental 
trains  across  the  mountains,  and  perform  numer 
ous  domestic  services,  were  running  their  useless 
courses  to  the  sea. 

Industrial  America  is  a  product  of  the  decades 
succeeding  the  Civil  War;  yet  even  in  1865  we 
were  a  large  manufacturing  nation.  The  leading 


6  THE  AGE  OF  BIG  BUSINESS 

characteristic  of  our  industries,  as  compared  with 
present  conditions,  was  that  they  were  individu 
alized.  Nearly  all  had  outgrown  the  household 
stage,  the  factory  system  had  gained  a  foothold 
in  nearly  every  line,  even  the  corporation  had  made 
its  appearance,  yet  small-scale  production  prevailed 
in  practically  every  field.  In  the  decade  preced 
ing  the  War,  vans  were  still  making  regular  trips 
through  New  England  and  the  Middle  States,  leav 
ing  at  farmhouses  bundles  of  straw  plait,  which  the 
members  of  the  household  fashioned  into  hats. 
The  farmers'  wives  and  daughters  still  supple 
mented  the  family  income  by  working  on  goods  for 
city  dealers  in  ready-made  clothing.  We  can  still 
see  in  Massachusetts  rural  towns  the  little  shoe 
shops  in  which  the  predecessors  of  the  existing  fac 
tory  workers  soled  and  heeled  the  shoes  which  shod 
our  armies  in  the  early  days  of  the  Civil  War. 
Every  city  and  town  had  its  own  slaughter  house; 
New  York  had  more  than  two  hundred;  what  is 
now  Fifth  Avenue  was  frequently  encumbered  by 
large  droves  of  cattle,  and  great  stockyards  oc 
cupied  territory  which  is  now  used  for  beautiful 
clubs,  railroad  stations,  hotels,  and  the  highest 
class  of  retail  establishments. 

In  this  period  before  the  Civil  War  compara- 


AT  THE  END  OF  THE  CIVIL  WAR         7 

lively  small  single  owners,  or  frequently  copartner 
ships,  controlled  practically  every  industrial  field. 
Individual  proprietors,  not  uncommonly  powerful 
families  which  were  almost  feudal  in  character, 
owned  the  great  cotton  and  woolen  mills  of  New 
England.  Separate  proprietors,  likewise,  con 
trolled  the  iron  and  steel  factories  of  New  York 
State  and  Pennsylvania.  Indeed  it  was  not  until 
the  War  that  corporations  entered  the  iron  indus 
try,  now  regarded  as  the  field  above  all  others 
adapted  to  this  kind  of  organization.  The  manu 
facture  of  sewing  machines,  firearms,  and  agricul 
tural  implements  started  on  a  great  scale  in  the 
Civil  War;  still,  the  prevailing  unit  was  the  private 
owner  or  the  partnership.  In  many  manufacturing 
lines  the  joint  stock  company  had  become  the  pre 
vailing  organization,  but  even  in  these  fields  the 
element  that  so  characterizes  our  own  age,  that  of 
combination,  was  exerting  practically  no  influence. 
Competition  was  the  order  of  the  day:  the  indus 
trial  warfare  of  the  sixties  was  a  free-for-all.  A 
mere  reference  to  the  status  of  manufactures  in 
which  the  trust  is  now  the  all-prevailing  fact  will 
make  the  contrast  clear.  In  1865  thousands  of  in 
dependent  companies  were  drilling  oil  in  Pennsyl 
vania  and  there  were  more  than  two  hundred  which 


8  THE  AGE  OF  BIG  BUSINESS 

were  refining  the  product.  Nearly  four  hundred 
and  fifty  operators  were  mining  coal,  not  even 
dimly  foreseeing  the  day  when  their  business  would 
become  a  great  railroad  monopoly.  The  two  hun 
dred  companies  that  were  making  mowers  and 
reapers,  seventy-five  of  them  located  in  New  York 
State,  had  formed  no  mental  picture  of  the  future 
International  Harvester  Company.  One  of  our 
first  large  industrial  combinations  was  that  which 
in  the  early  seventies  absorbed  the  manufacturers 
of  salt;  yet  the  close  of  the  Civil  War  found  fifty 
competing  companies  making  salt  in  the  Saginaw 
Valley  of  Michigan.  In  the  same  State,  about  fifty 
distinct  ownerships  controlled  the  copper  mines, 
while  in  Nevada  the  Comstock  Lode  had  more 
than  one  hundred  proprietors.  The  modern  trust 
movement  has  now  absorbed  even  our  lumber  and 
mineral  lands,  but  in  1865  these  rich  resources 
were  parceled  out  among  a  multiplicity  of  owners. 
No  business  has  offered  greater  opportunities  to  the 
modern  promoter  of  combinations  than  our  street 
railways.  In  1865  most  of  our  large  cities  had 
their  leisurely  horse-car  systems,  yet  practically 
every  avenue  had  its  independent  line.  New  York 
had  thirty  separate  companies  engaged  in  the  busi 
ness  of  local  transportation.  Indeed  the  Civil  War 


AT  THE  END  OF  THE  CIVIL  WAR         9 

period  developed  only  one  corporation  that  could 
be  described  as  a  "trust"  in  the  modern  sense. 
This  was  the  Western  Union  Telegraph  Company. 
Incredible  as  it  may  seem,  more  than  fifty  com 
panies,  ten  years  before  the  Civil  War,  were  en 
gaged  in  the  business  of  transmitting  telegraphic 
messages.  These  companies  had  built  their  tele 
graph  lines  precisely  as  the  railroads  had  laid  then- 
tracks;  that  is,  independent  lines  were  constructed 
connecting  two  given  points.  It  was  inevitable, 
of  course,  that  all  these  scattered  lines  should  come 
under  a  single  control,  for  the  public  convenience 
could  not  be  served  otherwise.  This  combination 
was  effected  a  few  years  before  the  War,  when  the 
Western  Union  Telegraph  Company,  after  a  long 
and  fierce  contest,  succeeded  in  absorbing  all  its 
competitors.  Similar  forces  were  bringing  to 
gether  certain  continuous  lines  of  railways,  but  the 
creation  of  huge  trunk  systems  had  not  yet  taken 
place.  How  far  our  industrial  era  is  removed  from 
that  of  fifty  years  ago  is  apparent  when  we  recall 
that  the  proposed  capitalization  of  $15,000,000, 
caused  by  the  merging  of  the  Boston  and  Worcester 
and  the  Western  railroads,  was  widely  denounced 
as  "monstrous"  and  as  a  corrupting  force  that 
would  destroy  our  Republican  institutions. 


10  THE  AGE  OF  BIG  BUSINESS 

Naturally  this  small-scale  ownership  was  re 
flected  in  the  distribution  of  wealth.  The  "swol 
len  fortunes"  of  that  period  rested  upon  the  same 
foundation  that  had  given  stability  for  centuries 
to  the  aristocracies  of  Europe.  Social  preemi 
nence  in  large  cities  rested  almost  entirely  upon 
the  ownership  of  land.  The  Astors,  the  Goelets,  the 
Rhinelanders,  the  Beekmans,  the  Brevoorts,  and 
practically  all  the  mighty  families  that  ruled  the 
old  Knickerbocker  aristocracy  in  New  York  were 
huge  landed  proprietors.  Their  fortunes  thus  had 
precisely  the  same  foundation  as  that  of  the  Prus 
sian  Junkers  today.  But  their  accumulations  com 
pared  only  faintly  with  the  fortunes  that  are  com 
monplace  now.  How  many  "millionaires"  there 
were  fifty  years  ago  we  do  not  precisely  know, 
s- The  only  definite  information  we  have  is  a  pam 
phlet  published  in  1855  by  Moses  Yale  Beach, 
proprietor  of  the  New  York  Sun>  on  the  "Wealthy 
Men  of  New  York."  This  records  the  names  of 
nineteen  citizens  who,  in  the  estimation  of  well- 
qualified  judges,  possessed  more  than  a  million 
dollars  each.  The  richest  man  in  the  list  was  Wil 
liam  B.  As  tor,  whose  estate  is  estimated  at  $6,000- 
000.  The  next  richest  man  was  Stephen  Whitney, 
also  a  large  landowner,  whose  fortune  is  listed  at 


AT  THE  END  OF  THE  CIVIL  WAR       11 

$5,000,000.  Then  comes  James  Lenox,  again  a 
landed  proprietor,  with  $3,000,000.  The  man  who 
was  to  accumulate  the  first  monstrous  American 
fortune,  Cornelius  Vanderbilt,  is  accredited  with 
a  paltry  $1,500,000.  Mr.  Beach's  little  pamphlet 
sheds  the  utmost  light  upon  the  economic  era  pre 
ceding  the  Civil  War.  It  really  pictures  an  indus 
trial  organization  that  belongs  as  much  to  ancient 
history  as  the  empire  of  the  Csesars.  His  study 
lists  about  one  thousand  of  New  York's  "wealthy 
citizens."  Yet  the  fact  that  a  man  qualified  for 
entrance  into  this  Valhalla  who  had  $100,000  to  his 
credit  and  that  nine- tenths  of  those  so  chosen  pos 
sessed  only  that  amount  shows  the  progress  con 
centrated  riches  have  made  in  sixty  years.  How 
many  New  Yorkers  of  today  would  look  upon  a 
man  with  $100,000  as  "wealthy"? 

The  sources  of  these  fortunes  also  show  the  eco 
nomic  changes  our  country  has  undergone.  To 
day,  when  we  think  of  our  much  exploited  million 
aires,  the  phrase  "captains  of  industry"  is  the 
accepted  description;  in  Mr.  Beach's  time  the 
popular  designation  was  "merchant  prince."  His 
catalogue  contains  no  "oil  magnates"  or  "steel 
kings"  or  "railroad  manipulators";  nearly  all 
the  industrial  giants  of  ante-bellum  times  —  as 


12  THE  AGE  OF  BIG  BUSINESS 

distinguished  from  the  socially  prominent  whose 
wealth  was  inherited  —  had  heaped  together  their 
accumulations  in  humdrum  trade.  Perhaps  Peter 
Cooper,  who  had  made  a  million  dollars  in  the 
manufacture  of  isinglass  and  glue,  and  George  Law, 
whose  gains,  equally  large,  represented  fortu 
nate  speculations  in  street  railroads,  faintly  suggest 
the  approaching  era;  yet  the  fortunes  which  are 
really  typical  are  those  of  William  Aspinwall,  who 
made  $4,000,000  in  the  shipping  business,  of  A.  T. 
Stewart,  whose  $2,000,000  represented  his  earn 
ings  as  a  retail  and  wholesale  dry  goods  mer 
chant,  and  of  Peter  Harmony,  whose  $1,000,000 
had  been  derived  from  happy  trade  ventures  in 
Cuba  and  Spain.  Many  of  the  reservoirs  of  this 
ante-bellum  wealth  sound  strangely  in  our  modern 
ears.  John  Haggerty  had  made  $1,000,000  as  an 
auctioneer;  William  L.  Coggeswell  had  made  half 
as  much  as  a  wine  importer;  Japhet  Bishop  had 
rounded  out  an  honest  $600,000  from  the  profits 
of  a  hardware  store;  while  Phineas  T.  Barnum 
ranks  high  in  the  list  by  virtue  of  $800,000  accumu 
lated  in  a  business  which  it  is  hardly  necessary  to 
specify.  Indeed  his  name  and  that  of  the  great 
landlords  are  almost  the  only  ones  in  this  list  that 
have  descended  to  posterity.  Yet  they  were  the 


AT  THE  END  OF  THE  CIVIL  WAR       13 

Rockefellers,  the  Carnegies,  the  Harrimans,  the 
Fricks,  and  the  Henry  Fords  of  their  day. 

Before  the  Civil  War  had  ended,  however,  the 
transformation  of  the  United  States  from  a  na 
tion  of  farmers  and  small-scale  manufacturers  to 
a  highly  organized  industrial  state  had  begun. 
Probably  the  most  important  single  influence  was 
the  War  itself.  Those  four  years  of  bitter  con 
flict  illustrate,  perhaps  more  graphically  than  any 
similar  event  in  history,  the  power  which  military 
operations  may  exercise  in  stimulating  all  the  pro 
ductive  forces  of  a  people.  In  thickly  settled  na 
tions,  with  few  dormant  resources  and  with  prac 
tically  no  areas  of  unoccupied  land,  a  long  war 
usually  produces  industrial  disorganization  and 
financial  exhaustion.  The  Napoleonic  wars  had 
this  effect  in  Europe;  in  particular  they  caused  a 
period  of  social  and  industrial  distress  in  England. 
The  few  years  immediately  following  Waterloo 
marked  a  period  when  starving  mobs  rioted  in  the 
streets  of  London,  setting  fire  to  the  houses  of  the 
aristocracy  and  stoning  the  Prince  Regent  when 
ever  he  dared  to  show  his  head  in  public,  when  cot 
ton  spindles  ceased  to  turn,  when  collieries  closed 
down,  when  jails  and  workhouses  were  overflowing 
with  a  wretched  proletariat,  and  when  gaunt  and 


14  THE  AGE  OF  BIG  BUSINESS 

homeless  women  and  children  crowded  the  country 
highways.  No  such  disorders  followed  the  Civil 
War  in  this  country,  at  least  in  the  North  and 
West.  Spiritually  the  struggle  accomplished  much 
in  awakening  the  nation  to  a  consciousness  of  its 
great  opportunities.  The  fact  that  we  could  spend 
more  than  a  million  dollars  a  day  —  expenditures 
that  hardly  seem  startling  in  amount  now,  but 
which  were  almost  unprecedented  then  —  and  that 
soon  after  hostilities  ceased  we  rapidly  paid  off  our 
large  debt,  directed  the  attention  of  foreign  capital 
ists  to  our  resources,  and  gave  them  the  utmost 
confidence  in  this  new  investment  field.  Immigra 
tion,  too,  started  after  the  war  at  a  rate  hitherto 
without  parallel  in  our  annals.  The  Germans  who 
had  come  in  the  years  preceding  the  Civil  War  had 
been  largely  political  refugees  and  democratic 
idealists,  but  now,  in  much  larger  numbers,  began 
the  influx  of  north  and  south  Germans  whose  dom 
inating  motive  was  economic.  These  Germans 
began  to  find  their  way  to  the  farms  of  the  Missis 
sippi  Valley;  the  Irish  began  once  more  to  crowd 
our  cities;  the  Slavs  gravitated  towards  the 
mines  of  Pennsylvania;  the  Scandinavians  settled 
whole  counties  of  certain  northwestern  States; 
while  the  Jews  began  that  conquest  of  the  tailoring 


AT  THE  END  OF  THE  CIVIL  WAR       15 

industries  that  was  ultimately  to  make  them 
the  clothiers  of  a  hundred  million  people.  For 
this  industrial  development,  America  supplied 
the  land,  the  resources,  and  the  business*  leaders, 
while  Europe  furnished  the  liquid  capital  and  the 
laborers. 

Even  more  directly  did  the  War  stimulate  our 
industrial  development.  Perhaps  the  greatest 
effect  was  the  way  in  which  it  changed  our  trans 
portation  system.  The  mere  necessity  of  con 
stantly  transporting  hundreds  of  thousands  of 
troops  and  war  supplies  demanded  reconstruction 
and  reequipment  on  an  extensive  scale.  The 
American  Civil  War  was  the  first  great  conflict  in 
which  railroads  played  a  conspicuous  military  part, 
and  their  development  during  those  four  years 
naturally  left  them  in  a  strong  position  to  meet  the 
new  necessities  of  peace.  One  of  the  first  effects 
of  the  War  was  to  close  the  Mississippi  River; 
consequently  the  products  of  the  Western  farms 
had  to  go  east  by  railroad,  and  this  fact  led  to 
that  preeminence  of  the  great  trunk  lines  which 
they  retain  to  this  day.  Almost  overnight  Chi 
cago  became  the  great  Western  shipping  center, 
and  though  the  river  boats  lingered  for  a  time  on 
the  Ohio  and  the  Mississippi  they  grew  fewer  year 


10  THE  AGE  OF  BIG  BUSINESS 

by  year.  Prosperity,  greater  than  the  country 
had  ever  known,  prevailed  everywhere  in  the  North 
throughout  the  last  two  years  of  the  War. 

So,  too,  feeding  and  supplying  an  army  of  mil 
lions  of  men  laid  the  foundation  of  many  of  our 
greatest  industries.  The  Northern  soldiers  in  the 
early  days  of  the  war  were  clothed  in  garments  so 
variegated  that  they  sometimes  had  trouble  in 
telling  friend  from  foe,  and  not  infrequently  they 
shot  at  one  another;  so  inadequately  were  our 
woolen  mills  prepared  to  supply  their  uniforms! 
But  larger  government  contracts  enabled  the  pro 
prietors  to  reconstruct  their  mills,  install  modern 
machines,  and  build  up  an  organization  and  a 
prosperous  business  that  still  endures.  Making 
boots  and  shoes  for  Northern  soldiers  laid  the 
foundation  of  America's  great  shoe  industry.  Ma 
chinery  had  already  been  applied  to  shoe  manu 
facture,  but  only  to  a  limited  extent;  under  the 
pressure  of  war  conditions,  however,  American 
inventive  skill  found  ways  of  performing  mechan 
ically  almost  all  the  operations  that  had  formerly 
been  done  by  hand.  The  McKay  sewing  machine, 
one  of  the  greatest  of  our  inventions,  which  was 
perfected  in  the  second  year  of  the  war,  did  as  much 
perhaps  as  any  single  device  to  keep  our  soldiers 


AT  THE  END  OF  THE  CIVIL  WAR       17 

well  shod  and  comfortable.  The  necessity  of  feed 
ing  these  same  armies  created  our  great  packing 
plants.  Though  McCormick  had  invented  his 
reaper  several  years  before  the  war,  the  new  agri 
cultural  machinery  had  made  no  great  headway. 
Without  this  machinery,  however,  our  Western 
farmers  could  never  have  harvested  the  gigantic 
crops  which  not  only  fed  our  soldiers  but  laid  the 
basis  of  our  economic  prosperity.  Thus  the  War 
directly  established  one  of  the  greatest,  and  cer 
tainly  one  of  the  most  romantic,  of  our  industries 
—  that  of  agricultural  machinery. 

Above  all,  however,  the  victory  at  Appomattox 
threw  upon  the  country  more  than  a  million  un 
employed  men.  Our  European  critics  predicted 
that  their  return  to  civil  life  would  produce  dire 
social  and  political  consequences.  But  these 
critics  were  thinking  in  terms  of  their  own  coun 
tries;  they  failed  to  consider  that  the  United 
States  had  an  immense  unoccupied  domain  which 
was  waiting  for  development.  The  men  who 
fought  the  Civil  War  had  demonstrated  precisely 
the  adventurous,  hardy  instincts  which  were  most 
needed  in  this  great  enterprise.  Even  before  the 
War  ended,  a  great  immigration  started  towards 
the  mines  and  farms  of  the  trans-Mississippi 


18  THE  AGE  OF  BIG  BUSINESS 

country.  There  was  probably  no  important  town 
or  district  west  of  the  Alleghanies  that  did  not 
absorb  a  considerable  number.  In  most  instances, 
too,  our  ex-soldiers  became  leaders  in  these  new 
communities.  Perhaps  this  movement  has  its 
most  typical  and  picturesque  illustration  in  the 
extent  to  which  the  Northern  soldiers  opened  up 
the  oil-producing  regions  of  western  Pennsylvania. 
Venango  County,  where  this  great  development 
started,  boasted  that  it  had  more  ex-soldiers  than 
any  similar  section  of  the  United  States. 

The  Civil  War  period  also  forced  into  prominence 
a  few  men  whose  methods  and  whose  achievements 
indicated,  even  though  roughly  and  indistinctly, 
a  new  type  of  industrial  leadership.  Every  pe 
riod  has  its  outstanding  figure  and,  when  the  Civil 
War  was  approaching  its  end,  one  personality  had 
emerged  from  the  humdrum  characters  of  the  time 
—  one  man  who,  hi  energy,  imagination,  and  gen 
ius,  displayed  the  forces  that  were  to  create  a  new 
American  world.  Although  this  man  employed  his 
great  talents  in  a  field,  that  of  railroad  transporta 
tion,  which  lies  outside  the  scope  of  the  present 
volume,  yet  in  this  comprehensive  view  I  may  take 
Cornelius  Vanderbilt  as  the  symbol  that  links  the 
old  industrial  era  with  the  new.  He  is  worthy  of 


AT  THE  END  OF  THE  CIVIL  WAR       19 

more  detailed  study  than  he  has  ever  received,  for 
in  personality  and  accomplishments  Vanderbilt  is 
the  most  romantic  figure  in  the  history  of  American 
finance.  We  must  remember  that  Vanderbilt  was 
born  in  1794  and  that  at  the  time  we  are  consider 
ing  he  was  seventy-one  years  old.  In  the  matter 
of  years,  therefore,  his  career  apparently  belongs 
to  the  ante-bellum  days,  yet  the  most  remarkable 
fact  about  this  remarkable  man  is  that  his  real  life 
work  did  not  begin  until  he  had  passed  his  seven 
tieth  year.  In  1865  Vanderbilt's  fortune,  consist 
ing  chiefly  of  a  fleet  of  steamboats,  amounted  to 
about  $10,000,000;  he  died  twelve  years  later,  in 
1877,  leaving  $104,000,000,  the  first  of  those  co 
lossal  American  fortunes  that  were  destined  to 
astound  the  world.  The  mere  fact  that  this  for 
tune  was  the  accumulated  profit  of  only  ten  years 
shows  perhaps  more  eloquently  than  any  other  cir 
cumstance  that  the  United  States  had  entered  a 
new  economic  age.  That  new  factor  in  the  life  of 
America  and  the  world,  the  railroad,  explains  his 
achievement.  Vanderbilt  was  one  of  the  most  as 
tonishing  characters  in  our  history.  His  physical 
exterior  made  him  perhaps  the  most  imposing  fig 
ure  in  New  York.  In  his  old  age,  at  seventy-three, 
Vanderbilt  married  his  second  wife,  a  beautiful 


20  THE  AGE  OF  BIG  BUSINESS 

Southern  widow  who  had  just  turned  her  thirtieth 
year,  and  the  appearance  of  the  two,  sitting  side  by 
side  in  one  of  the  Commodore's  smartest  turnouts, 
driving  recklessly  behind  a  pair  of  the  fastest  trot 
ters  of  the  day,  was  a  common  sight  in  Central 
Park.  Nor  did  Vanderbilt  look  incongruous  in 
this  brilliant  setting.  His  tall  and  powerful  frame 
was  still  erect,  and  his  large,  defiant  head,  ruddy 
cheeks,  sparkling,  deep-set  black  eyes,  and  snowy 
white  hair  and  whiskers,  made  him  look  every  inch 
the  Commodore.  These  public  appearances  lent  a 
pleasanter  and  more  sentimental  aspect  to  Vander- 
bilt's  life  than  his  intimates  always  perceived.  For 
his  manners  were  harsh  and  uncouth;  he  was  totally 
without  education  and  could  write  hardly  half  a 
dozen  lines  without  outraging  the  spelling-book. 
Though  he  loved  his  race-horses,  had  a  fondness  for 
music,  and  could  sit  through  long  winter  evenings 
while  his  young  wife  sang  old  Southern  ballads, 
Vanderbilt's  ungovernable  temper  had  placed  him 
on  bad  terms  with  nearly  all  his  children  —  he 
had  had  thirteen,  of  whom  eleven  survived  him  — 
who  contested  his  will  and  exposed  all  his  eccentri 
cities  to  public  view  on  the  ground  that  the  man 
who  created  the  New  York  Central  system  was  ac 
tually  insane.  Vanderbilt's  methods  and  his  tern- 


AT  THE  END  OF  THE  CIVIL  WAR       21 

perament  presented  such  a  contrast  to  the  com 
monplace  minds  which  had  previously  dominated 
American  business  that  this  explanation  of  his 
career  is  perhaps  not  surprising.  He  saw  things  in 
their  largest  aspects  and  in  his  big  transactions  he 
seemed  to  act  almost  on  impulse  and  intuition.  He 
could  never  explain  the  mental  processes  by  which 
he  arrived  at  important  decisions,  though  these 
decisions  themselves  were  invariably  sound.  He 
seems  to  have  had,  as  he  himself  frequently  said, 
almost  a  seer-like  faculty.  He  saw  visions,  and 
he  believed  in  dreams  and  in  signs.  The  greatest 
practical  genius  of  his  time  was  a  frequent  attend 
ant  at  spiritualistic  seances;  he  cultivated  person 
ally  the  society  of  mediums,  and  in  sickness  he  usu 
ally  resorted  to  mental  healers,  mesmerists,  and 
clairvoyants.  Before  making  investments  or  em 
barking  in  his  great  railroad  ventures,  Vanderbilt 
visited  spiritualists;  we  have  one  circumstantial 
account  of  his  summoning  the  wraith  of  Jim  Fiske 
to  advise  him  in  stock  operations.  His  excessive 
vanity  led  him  to  print  his  picture  on  all  the  Lake 
Shore  bonds;  he  proposed  to  New  York  City  the 
construction  in  Central  Park  of  a  large  monument 
that  would  commemorate,  side  by  side,  the  names 
of  Vanderbilt  and  Washington;  and  he  actually 


22  THE  AGE  OF  BIG  BUSINESS 

erected  a  large  statue  to  himself  in  his  new  Hud 
son  River  station  in  St.  John's  Park.  His  atti 
tude  towards  the  public  was  shown  in  his  remark 
when  one  of  his  associates  told  him  that  "each  and 
every  one"  of  certain  transactions  which  he  had 
just  forced  through  "is  absolutely  forbidden  by  the 
statutes  of  the  State  of  New  York. "  "My  God, 
John!"  said  the  Commodore,  "you  don't  suppose 
you  can  run  a  railroad  in  accordance  with  the  stat 
utes  of  the  State  of  New  York,  do  you?"  "Law!" 
*he  once  roared  on  a  similar  occasion,  "What  do  I 
care  about  law?  Hain't  I  got  the  power?" 

These  things  of  course  were  the  excrescences  of 
an  extremely  vital,  overflowing,  imaginative,  ener 
getic  human  being;  they  are  traits  that  not  infre 
quently  accompany  genius.  And  the  work  which 
Vanderbilt  did  remains  an  essential  part  of  our  eco 
nomic  organization  today.  Before  his  time  a  trip 
to  Chicago  meant  that  the  passenger  changed 
trains  seventeen  times,  and  that  all  freight  had  to 
be  unloaded  at  a  similar  number  of  places,  carted 
across  towns,  and  reloaded  into  other  trains.  The 
magnificent  railroad  highway  that  extends  up  the 
banks  of  the  Hudson,  through  the  Mohawk  Valley, 
and  alongside  the  borders  of  Lake  Erie  —  a  water 
line  route  nearly  the  entire  distance  —  was  all  but 


AT  THE  END  OF  THE  CIVIL  WAR       23 

useless.  It  is  true  that  not  all  the  consolidation 
of  these  lines  was  Vanderbilt's  work.  In  1853 
certain  millionaires  and  politicians  had  linked  to 
gether  the  several  separate  lines  extending  from 
Albany  to  Buffalo,  but  they  had  managed  the  new 
road  so  wretchedly  that  the  largest  stockholders  in 
1867  begged  Vanderbilt  to  take  over  the  control. 
By  1873  the  Commodore  had  acquired  the  Hudson 
River,  extending  from  New  York  to  Albany,  the 
New  York  Central  extending  from  Albany  to  Buf 
falo,  and  the  Lake  Shore  which  ran  from  Buffalo  to 
Chicago.  In  a  few  years  these  roads  had  been  con 
solidated  into  a  smoothly  operating  system.  If,  in 
transforming  these  discordant  railroads  into  one, 
Vanderbilt  bribed  legislatures  and  corrupted  courts, 
if  he  engaged  in  the  largest  stock-watering  opera 
tions  on  record  up  to  that  time,  and  took  advantage 
of  inside  information  to  make  huge  winnings  on  the 
stock  exchange,  he  also  ripped  up  the  old  iron  rails 
and  relaid  them  with  steel,  put  down  four  tracks 
where  formerly  there  had  been  two,  replaced  wood 
en  bridges  with  steel,  discarded  the  old  locomotives 
for  new  and  more  powerful  ones,  built  splendid  new 
terminals,  introduced  economies  in  a  hundred  di 
rections,  cut  down  the  hours  required  in  a  New 
York-Chicago  trip  from  fifty  to  twenty-four,  made 


24  THE  AGE  OF  BIG  BUSINESS 

his  highway  an  expeditious  line  for  transport 
ing  freight,  and  transformed  railroads  that  had 
formerly  been  the  playthings  of  Wall  Street  and 
that  frequently  could  not  meet  their  pay-rolls  into 
exceedingly  profitable,  high  dividend  paying  prop 
erties.  In  this  operation  Vanderbilt  typified  the 
era  that  was  dawning  —  an  era  of  ruthlessness,  of 
personal  selfishness,  of  corruption,  of  disregard  of 
private  rights,  of  contempt  for  law  and  legisla 
tures,  and  yet  of  vast  and  beneficial  achievement. 
The  men  of  this  time  may  have  traveled  roughshod 
to  their  goal,  but  after  all,  they  opened  up,  in  an 
amazingly  short  time,  a  mighty  continent  to  the 
uses  of  mankind.  The  triumph  of  the  New  York 
Central  and  Hudson  River  Railroad  under  Van 
derbilt,  a  triumph  which  dazzled  European  inves 
tors  as  well  as  our  own,  and  which  represented  an 
entirely  different  business  organization  from  any 
thing  the  nation  had  hitherto  seen,  appropriately 
ushered  in  the  new  business  era  whose  outlines  will 
be  sketched  in  the  succeeding  pages. 


CHAPTER  II 

THE  FIRST  GREAT  AMERICAN  TRUST 

WHEN  Cornelius  Vanderbilt  died  in  1877,  America's 
first  great  industrial  combination  had  become  an 
established  fact.  In  that  year  the  Standard  Oil 
Company  of  Ohio  controlled  at  least  ninety  per 
cent  of  the  business  of  refining  and  marketing 
petroleum.  A  new  portent  had  appeared  in  our 
economic  life,  a  phenomenon  that  was  destined 
to  affect  not  only  the  social  and  business  exist 
ence  of  the  every -day  American  but  even  his  po 
litical  and  legal  institutions. 

It  seems  natural  enough  at  the  present  time  to 
refer  to  petroleum  as  an  indispensable  commodity. 
At  the  beginning  of  the  Civil  War,  however,  any 
such  description  would  have  been  absurd.  Though 
petroleum  was  not  unknown,  millions  of  American 
households  were  still  burning  candles,  whale  oil, 
and  other  illuminants.  Not  until  1859  did  our 
ancestors  realize  that,  concealed  in  the  rocks  of 

25 


26  THE  AGE  OF  BIG  BUSINESS 

western  Pennsylvania,  lay  apparently  inexhaustible 
quantities  of  a  liquid  which,  when  refined,  would 
give  a  light  exceeding  in  brilliancy  anything  they 
had  hitherto  known.  The  mere  existence  of  pe 
troleum,  it  is  true,  had  been  a  familiar  fact  for  cen 
turies.  Herodotus  mentions  the  oil  pits  of  Baby 
lon,  and  Pliny  informs  us  that  this  oil  was  actually 
used  for  lighting  in  certain  parts  of  Sicily.  It  had 
never  become  an  object  of  universal  use,  simply 
because  no  one  had  discovered  how  to  obtain  it 
in  sufficient  quantities.  No  one  had  suspected,  in 
deed,  that  petroleum  existed  practically  in  the  form 
of  great  subterranean  rivers,  lakes,  or  even  seas. 
For  ages  this  great  natural  treasure  had  been 
seeking  to  advertise  its  presence  by  occasionally 
seeping  through  the  rocks  and  appearing  on  the 
surface  of  watercourses.  It  had  been  doing  this 
all  over  the  world  —  in  China,  in  Russia,  in  Ger 
many,  in  England,  in  our  own  country.  Yet  our 
obtuse  ancestors  had  for  centuries  refused  to  take 
the  hint.  We  can  find  much  cause  for  self-con 
gratulation  in  that  it  was  apparently  the  American 
mind  that  first  acted  upon  this  obvious  suggestion. 
In  Venango  County,  Pennsylvania,  petroleum 
floated  in  such  quantities  on  the  surface  of  a  branch 
of  the  Allegheny  River  that  this  small  watercourse 


THE  FIRST  GREAT  AMERICAN  TRUST  27 

had  for  generations  been  known  as  Oil  Creek.  The 
neighboring  farmers  used  to  collect  the  oil  and 
use  it  to  grease  their  wagon  axles;  others,  more  en 
terprising,  made  a  business  of  gathering  the  float 
ing  substance,  packing  it  in  bottles,  and  selling  it 
broadcast  as  a  medicine.  The  most  famous  of  these 
concoctions,  "Seneca  Oil,"  was  widely  advertised 
as  a  sure  cure  for  rheumatism,  and  had  an  extensive 
sale  in  this  country.  "  Kier's  Rock  Oil"  afterwards 
had  an  even  more  extended  use.  Samuel  M.  Kier, 
who  exploited  this  comprehensive  cure-all,  made  no 
lasting  contributions  to  medical  science,  but  his 
method  of  obtaining  his  medicament  led  indirectly 
to  the  establishment  of  a  great  industry.  In  this 
western  Pennsylvania  region  salt  manufacture  had 
been  a  thriving  business  for  many  years;  the  salt 
was  obtained  from  salt  water  by  means  of  arte 
sian  wells.  This  salt  water  usually  came  to  the  sur 
face  contaminated  with  that  same  evil-smelling  oil 
which  floated  so  constantly  on  top  of  the  rivers 
and  brooks.  The  salt  makers  spent  much  time 
and  money  "purifying"  their  water  from  this  sub 
stance,  never  apparently  suspecting  that  the  really 
valuable  product  of  their  wells  was  not  the  salt 
water  they  so  carefully  preserved,  but  the  petro 
leum  which  they  threw  away.  Samuel  M.  Kier  was 


28  THE  AGE  OF  BIG  BUSINESS 

originally  a  salt  manufacturer;  more  canny  than  his 
competitors,  he  sold  the  oil  which  came  up  with  his 
water  as  a  patent  medicine.  In  order  to  give  a  mys 
terious  virtue  to  this  remedy,  Kier  printed  oh  his 
labels  the  information  that  it  had  been  "pumped 
up  with  salt  water  about  four  hundred  feet  below 
the  earth's  surface. "  His  labels  also  contained  the 
convincing  picture  of  an  artesian  well  —  a  rough 
woodcut  which  really  laid  the  foundation  of  the 
Standard  Oil  Company. 

In  the  late  fifties  Mr.  George  H.  Bissell  had  be 
come  interested  in  rock  oil,  not  as  an  embrocation 
and  as  a  cure  for  most  human  ills,  but  as  a  light- 
giving  material.  A  professor  at  Dartmouth  had 
performed  certain  experiments  with  this  substance 
which  had  sunk  deeply  into  Bissell's  imagination. 
So  convinced  was  this  young  man  that  he  could 
introduce  petroleum  commercially  that  he  leased 
certain  fields  in  western  Pennsylvania  and  sent  a 
specimen  of  the  oil  to  Benjamin  Silliman,  Jr.,  Pro 
fessor  of  Chemistry  at  Yale.  Professor  Silliman 
gave  the  product  a  more  complete  analysis  than  it 
had  ever  previously  received  and  submitted  a  re 
port  which  is  still  the  great  classic  in  the  scientific 
literature  of  petroleum.  This  report  informed  Bis 
sell  that  the  substance  could  be  refined  cheaply  and 


>     THE  FIRST  GREAT  AMERICAN  TRUST  29 

easily,  and  that,  when  refined,  it  made  a  splendid 
illuminant,  besides  yielding  certain  by-products, 
such  as  paraffin  and  naphtha,  which  had  a  great 
commercial  value.  So  far,  Bissell's  enterprise 
seemed  to  promise  success,  yet  the  great  problem 
still  remained:  how  could  he  obtain  this  rock  oil 
in  amounts  large  enough  to  make  his  enterprise  a 
practical  one?  A  chance  glimpse  of  Kier's  label, 
with  its  picture  of  an  artesian  well,  supplied  Bissell 
with  his  answer.  He  at  once  sent  E.  L.  Drake  into 
the  oil-fields  with  a  complete  drilling  equipment,  to 
look,  not  for  salt  water,  but  for  oil.  Nothing  seems 
quite  so  obvious  today  as  drilling  a  well  into  the 
rock  to  discover  oil,  yet  so  strange  was  the  idea  in 
Drake's  time  that  the  people  of  Titusville,  where 
he  started  work,  regarded  him  as  a  lunatic  and 
manifested  a  hostility  to  his  enterprise  that  de 
layed  operations  for  several  months.  Yet  one  day 
in  August,  1859,  the  coveted  liquid  began  flowing 
from  "Drake's  folly"  at  the  rate  of  twenty-five 
barrels  a  day. 

Because  of  this  performance  Drake  has  gone 
down  to  fame  as  the  man  who  "discovered  oil." 
In  the  sense  that  his  operation  made  petroleum 
available  to  the  uses  of  mankind,  Drake  was  its 
discoverer,  and  his  achievement  seems  really  a 


30  THE  AGE  OF  BIG  BUSINESS 

greater  one  than  that  of  the  men  who  first  made 
apparent  our  beds  of  coal,  iron,  copper,  or  even 
gold.  For  Drake  really  uncovered  an  entirely  new 
substance.  And  the  country  responded  spontane 
ously  to  Drake's  success.  For  anything  approach 
ing  the  sudden  rush  to  the  oil-fields  we  shall  have  to 
go  to  the  discovery  of  gold  in  California  ten  years 
before.  Men  flocked  into  western  Pennsylvania  by 
the  thousands;  fortunes  were  made  and  lost  almost 
instantaneously.  Oil  flowed  so  plentifully  in  this 
region  that  it  frequently  ran  upon  the  ground,  and 
the  "gusher,"  which  threw  a  stream  of  the  pre 
cious  liquid  sometimes  a  hundred  feet  and  more  in 
to  the  air,  became  an  almost  every-day  occurrence. 
The  discovery  took  the  whole  section  by  sur 
prise;  there  were  no  towns,  no  railways,  and  no 
wagon  roads  except  a  few  almost  impassable  lum 
ber  trails.  Yet,  almost  in  a  twinkling,  the  whole 
situation  changed;  towns  sprang  up  overnight, 
roads  were  built,  over  which  teamsters  could  carry 
the  oil  to  the  nearest  shipping  points,  and  the  great 
trunk  lines  began  to  extend  branches  into  the  re 
gions.  The  one  thing,  next  to  Drake's  well,  that 
made  the  oil  available,  was  the  discovery*  which 
was  made  by  Samuel  Van  Syckel,  that  a  two-inch 
pipe,  starting  at  the  well,  could  convey  the  oil  for 


THE  FIRST  GREAT  AMERICAN  TRUST  31 

several  miles  to  the  nearest  railway  station.  In  a 
few  years  the  whole  oil  region  of  Venango  County 
was  an  inextricable  tangle  of  these  primitive  pipe 
lines. 

Thus,  before  the  Civil  War  had  ended,  the  west 
ern  Pennsylvania  wilderness  had  been  transformed 
into  the  busy  headquarters  of  a  new  industry. 
Companies  had  been  formed,  many  of  them  the 
wildest  stock- jobbing  operations,  refineries  had 
been  started,  in  a  few  years  the  whalers  of  New 
England  had  almost  lost  their  occupation,  but  mil 
lions  of  American  homes,  that  had  hitherto  had  to 
spend  the  long  winter  evenings  almost  in  darkness, 
suddenly  found  themselves  flooded  with  light.  In 
Cleveland,  in  Pittsburgh,  in  Philadelphia,  in  New 
York,  and  in  the  oil  regions,  the  business  of  refin 
ing  and  selling  petroleum  had  reached  extensive 
proportions.  Europe,  although  it  had  great  un 
developed  oil-fields  of  its  own,  drew  upon  this  new 
American  enterprise  to  such  an  extent  that,  eleven 
years  after  Drake's  "discovery,"  petroleum  had 
taken  fourth  place  among  our  exported  articles. 

The  very  year  that  Bissell  had  organized  his  pe 
troleum  company  a  boy  of  sixteen  had  obtained  his 
first  job  in  a  produce  commission  office  on  a  dock  in 
Cleveland.  As  the  curtain  rises  on  the  career  of 


32  THE  AGE  OF  BIG  BUSINESS 

John  D.  Rockefeller,  we  see  him  perched  upon  a 
high  stool,  adding  up  figures  and  casting  accounts, 
faithfully  doing  every  odd  office  job  that  came  his 
way,  earning  his  employer's  respect  for  his  indus 
try,  his  sobriety,  and  his  unmistakable  talents  for 
business.  Nor  does  this  picture  inadequately  visu 
alize  Rockefeller's  whole  after-life,  and  explain  the 
business  qualities  that  made  possible  his  unexam 
pled  success.  It  is,  indeed,  the  scene  to  which  Mr. 
Rockefeller  himself  most  frequently  reverts  when, 
in  his  famous  autobiographical  discourses  to  his 
Cleveland  Sunday  School,  he  calls  our  attention 
to  the  rules  that  inevitably  lead  to  industrial  pros 
perity.  "Thrift,  thrift,  Horatio,"  is  the  one  idea 
upon  which  the  great  captain  of  the  oil  business 
has  always  insisted.  Many  have  detected  in  these 
habits  of  mind  only  the  cheese-paring  activities 
of  a  naturally  narrow  spirit.  Rockefeller's  old 
Cleveland  associates  remember  him  as  the  greatest 
bargainer  they  had  ever  known,  as  a  man  who  had 
an  eye  for  infinite  details  and  an  unquenchable 
patience  and  resource  in  making  economies.  Yet 
Rockefeller  was  clearly  more  than  a  pertinacious 
haggler  over  trifles.  Certainly  such  a  diagnosis 
does  not  explain  a  man  who  has  built  up  one  of  the 
world's  greatest  organizations  and  accumulated 


D.  ROCKEFELLER 

Painting  by  John  S.  Sargent. 


IE  AGE  OP  BIG  BUSINESS 

John  D.  Rockefeller,  we  see  him  perched  upon  a 
high  stool,  adding  up  figures  and  casting  accounts, 
faithfully  doing  every  odd  office  job  that  came  his 
way,  earning  his  employer's  respect  for  his  indus 
try,  his  sobriety,  and  his  unmi«t*k*We  talents  for 
business.  Nor  does  this  picture  inadequately  visu 
alize  Rockefeller's  whole  af  •  md  explain  the 
business  qualities  that  made  poaaibJ  ••  his  unexam 
pled  success.  It  is,  indeed,  the  »e«nc  to  which  Mr. 
Rockefeller  himself  most  frequently  reverts  when, 

in  his  famous  autobiograp  ^courses  to  his 

r-i      i     ^  c      AaaqaraA'toa  i\  Y.UOX, 

Cleveland  Sunday  school,  he  calls  our  attention 

to  the  rules  that'ffigvitM^aa  dtriaJ  pros 

perity.  "Thrift,  thrift,  Horatio,"  is  the  one  idea 
upon  which  the  great  captain  of  the  oil  business 
has  always  insisted.  Many  have  detected  in  these 
habits  of  mind  only  the  cheese-paring  activities 
of  a  naturally  narrow  spirit.  Rockefeller's  old 
Cleveland  associates  remember  him  as  the  greatest 
bargainer  they  had  ever  known,  *#  *  maa  who  had 
an  eye  for  infinite  details  and  an  unquenchable 
patience  and  resource  in  making  economies.  Yet 
Rockefeller  was  clearly  more  than  a  pertinacious 
haggler  over  trifles.  Certainly  such  a  diagnosis 
does  not  explain  a  man  who  has  built  up  one  of  the 
world's  greatest  organizations  and  accumulated 


Bra.vurs.An  dsrssn-L  - 


THE  FIRST  GREAT  AMERICAN  TRUST  33 

the  largest  fortune  which  has  ever  been  placed  at 
the  disposal  of  one  man.  Indeed,  Rockefeller  dis 
played  unusual  business  ability  even  before  he 
entered  the  oil  business.  A  young  man  who,  at 
the  age  of  nineteen,  could  start  a  commission 
house  and  do  a  business  of  nearly  five  hundred 
thousand  the  first  year  must  have  had  commer 
cial  capacity  to  an  extraordinary  degree. 

Fate  had  placed  Rockefeller  in  Cleveland  in  the 
days  when  the  oil  business  had  got  well  under  way. 
In  the  early  sixties  a  score  or  so  of  refineries  had 
started  in  this  town,  many  of  which  were  making 
large  profits.  It  is  not  surprising  that  Rockefeller, 
gazing  at  these  black  and  evil-smelling  buildings 
from  the  vantage  point  of  his  commission  office, 
should  have  felt  an  impulse  to  join  in  the  gamble. 
He  plunged  into  this  new  activity  at  the  age  of 
twenty -three.  He  possessed  two  great  advantages 
over  most  of  his  adventurous  competitors ;  one  was 
a  heavy  bank  account,  representing  his  earnings  in 
the  commission  business,  and  the  other  a  partner, 
Samuel  Andrews,  who  was  generally  regarded  as  a 
mechanical  genius  in  the  production  of  illuminating 
oil.  At  the  beginning,  therefore,  Rockefeller  had 
the  two  essentials  which  largely  explain  his  sub 
sequent  career;  an  adequate  liquid  capital  and 


34  THE  AGE  OF  BIG  BUSINESS 

high  technical  resources.  In  the  first  few  years  the 
Rockefeller  houses  —  he  rapidly  organized  three, 
one  after  another  —  competed  with  a  large  num 
ber  of  other  units  in  the  oil  business  on  somewhat 
more  than  even  terms.  At  this  time  Rockefeller 
was  merely  one  of  a  large  number  of  successful  oil 
refiners,  yet  during  these  early  days  a  grandiose 
scheme  was  taking  shape  in  that  quiet,  insinuating, 
far-reaching  brain.  He  said  nothing  about  it,  even 
to  his  closest  associates,  yet  it  filled  his  every  wak 
ing  hour.  For  this  young  man  was  taking  a  com 
prehensive  sweep  of  the  world  and  he  saw  millions 
of  people,  in  the  Americas,  in  Europe,  and  in 
Asia,  whose  need  for  the  article  in  which  he  dealt 
would  grow  more  insistent  every  day.  He  saw 
that  he  was  handling  a  product  which  was  becom 
ing  as  much  a  necessity  of  life  as  the  air  itself. 
The  young  man  reached  out  to  grasp  this  business. 
"All  of  it,"  we  can  picture  Rockefeller  saying  to 
himself,  "all  of  it  shall  be  mine."  Any  study  of 
Rockefeller's  career  must  lead  to  the  conclusion 
that,  before  he  had  reached  his  thirtieth  year,  he 
had  determined  to  monopolize  this  growing  neces 
sity.  The  mere  fact  that  this  young  man  could 
form  such  a  stupendous  plan  indicates  that  in 
him  we  are  meeting  for  the  first  time  a  new  type 


THE  FIRST  GREAT  AMERICAN  TRUST  35 

of  industrial  leader.  At  that  time  monopolies 
were  unknown  in  the  United  States.  That  certain 
old  English  Kings  had  frequently  granted  exclu 
sive  trading  privileges  to  favored  merchants  most 
educated  Americans  knew;  and  their  knowledge  of 
monopolies  extended  little  further  than  this.  Yet 
about  1868  John  D.  Rockefeller  started  consciously 
to  revive  this  ancient  practice,  and  to  bring  under 
one  ownership  the  magnificent  industry  to  which 
Drake's  sensational  discovery  had  given  rise. 

Daring  as  was  this  conception,  the  resourceful 
ness  and  the  skill  with  which  Rockefeller  executed 
it  were  more  startling  still.  Merely  to  catalogue, 
one  by  one,  the  achievements  of  the  ten  succeed 
ing  fruitful  years,  almost  takes  one's  breath  away. 
Indeed  the  whole  operation  proceeded  with  such 
a  Napoleonic  rapidity  of  action  that  the  outside 
world  had  hardly  grasped  Rockefeller's  intention 
before  the  monopoly  had  been  made  complete.  We 
catch  one  glimpse  of  Rockefeller,  in  1868,  as  head  of 
the  prosperous  house  of  Rockefeller,  Andrews,  and 
Flagler,  and  eight  years  afterwards  we  see  him  once 
more,  this  time  the  man  who  controlled  practically 
the  entire  petroleum  business  of  the  world.  His 
career  of  conquest  began  in  1870,  when  the  firm 
of  Rockefeller,  Andrews,  and  Flagler,  joining  hands 


36  THE  AGE  OF  BIG  BUSINESS 

with  several  large  capitalists  in  Cleveland  and  New 
York,  was  incorporated  under  the  name  of  the 
Standard  Oil  Company  of  Ohio.  In  1870  about 
twenty-five  independent  refineries,  many  of  them 
prosperous  and  powerful,  were  manufacturing  oil 
in  the  city  of  Cleveland;  two  years  afterward  this 
new  Standard  Oil  Company  had  absorbed  all  of 
them  except  five.  In  these  two  critical  years  the  oil 
business  of  the  largest  refining  center  in  the  United 
States  had  thus  passed  into  Rockefeller's  hands. 
By  1874  the  greatest  refineries  in  New  York  and 
Philadelphia  had  likewise  merged  their  identity 
with  his  own.  When  Rockefeller  began  his  acquisi 
tion,  there  were  thirty  independent  refineries  op 
erating  in  Pittsburgh,  all  of  which,  in  four  or  five 
years,  passed  one  by  one  under  his  control.  The 
largest  refineries  of  Baltimore  surrendered  in  1875. 
These  capitulations  left  only  one  important  refin 
ing  headquarters  in  the  United  States  which  the 
Standard  had  not  absorbed.  This  was  that  section 
of  western  Pennsylvania  where  the  oil  business  had 
had  its  origin.  The  mere  fact  that  this  area  was 
the  headquarters  of  the  oil  supply  gave  it  great 
advantages  as  a  place  for  manufacturing  the  fin 
ished  product.  The  oil  regions  regarded  these  ad 
vantages  as  giving  them  the  right  to  dominate  the 


THE  FIRST  GREAT  AMERICAN  TRUST  37 

growing  industry,  and  they  had  frequently  pro 
claimed  the  doctrine  that  the  business  belonged  to 
them.  They  hated  Rockefeller  as  much  as  they 
feared  him,  yet  at  the  very  moment  when  the  Ti- 
tusville  operators  were  hanging  him  in  effigy  and 
posting  the  hoardings  with  cabalistic  signs  against 
his  corporation,  this  mysterious,  almost  uncanny 
power  was  encircling  them.  Men  who  one  night 
were  addressing  public  meetings  denouncing  the 
Standard  influence  would  suddenly  sell  out  their 
holdings  the  next  day.  In  1875  John  D.  Archbold, 
a  brilliant  young  refiner  who  had  grown  up  in  the 
oil  regions  and  who  had  gained  much  local  fame  as 
opponent  of  the  Standard,  appeared  in  Titusville  as 
the  President  of  the  Acme  Oil  Company.  At  that 
time  there  were  twenty-seven  independent  refiner 
ies  in  this  section.  Archbold  began  buying  and 
leasing  these  establishments  for  his  Acme  Com 
pany,  and  in  about  four  years  practically  every 
one  had  passed  under  his  control.  The  Acme  Com 
pany  was  merely  a  subsidiary  of  the  Standard  Oil. 
These  rapid  purchasing  campaigns  gave  the 
Standard  ninety  per  cent  of  all  the  refineries  in  the 
United  States,  but  Rockefeller's  scheme  compre 
hended  more  than  the  acquisition  of  refineries.  In 
the  main  the  Rockefeller  group  left  the  production 


38  THE  AGE  OF  BIG  BUSINESS 

of  crude  oil  in  the  hands  of  the  private  drillers,  but 
practically  every  other  branch  of  the  business 
passed  ultimately  into  their  hands.  Both  the  New 
York  Central  and  the  Erie  railroads  surrendered 
to  the  Standard  the  large  oil  terminal  stations 
which  they  had  maintained  for  years  in  New  York. 
As  a  consequence,  the  Standard  obtained  complete 
supervision  of  all  oil  sent  by  railroad  into  New 
York,  and  it  also  secured  the  machinery  of  a  com 
plete  espionage  system  over  the  business  of  com 
petitors.  The  Standard  acquired  companies  which 
had  built  up  a  large  business  in  marketing  oil. 
Even  more  dramatic  was  its  success  in  gathering 
up,  one  after  another,  these  pipe  lines  which  repre 
sented  the  circulatory  system  of  the  oil  industry. 
In  the  early  days  these  pipe  lines  were  small  and 
comparatively  simple  affairs.  They  merely  carried 
the  crude  oil  from  the  wells  to  railroad  centers; 
from  these  stations  the  railroads  transported  it  to 
the  refineries  at  Cleveland,  New  York,  and  other 
places.  At  an  early  day  the  construction  and  man 
agement  of  these  pipe  lines  became  a  separate  in 
dustry.  And  now,  in  1873,  the  Standard  Oil  Com 
pany  secured  possession  of  a  one-third  interest  in 
the  largest  of  these  privately  owned  companies,  the 
American  Transfer  Company.  Soon  afterward  the 


THE  FIRST  GREAT  AMERICAN  TRUST  39 

United  Pipe  Line  Company  went  under  their  con 
trol.  In  1877  the  Empire  Transportation  Com 
pany,  a  large  pipe  line  and  refining  corporation 
which  the  Pennsylvania  Railroad  had  controlled 
for  many  years,  became  a  Standard  subsidiary. 

Meanwhile  certain  hardy  spirits  in  the  oil  regions 
had  conceived  a  much  more  ambitious  plan.  Why 
not  build  great  underground  mains  directly  from 
the  oil  regions  to  the  seaboard,  pump  the  crude  oil 
directly  to  the  city  refineries,  and  thus  free  them 
selves  from  dependence  on  the  railroads?  At  first 
the  idea  of  pumping  oil  through  pipes  over  the  Alle- 
ghany  Mountains  seemed  grotesque,  but  competent 
engineers  gave  their  indorsement  to  the  plan.  A 
certain  "Dr."  Hostetter  built  for  the  Columbia 
Conduit  Company  a  trunk  pipe  line  that  extended 
thirty  miles  from  the  oil  regions  to  Pittsburgh. 
Hardly  had  Hostetter  completed  his  splendid  pro 
ject  when  the  Standard  Oil  capitalists  quietly 
appeared  and  purchased  it!  For  four  years  an 
other  group  struggled  with  an  even  more  ambitious 
scheme,  the  construction  of  a  conduit,  five  hundred 
miles  long,  from  the  oil  regions  to  Baltimore.  The 
American  people  looked  on  admiringly  at  the  splen 
did  enterprise  whose  projectors,  led  by  General 
Haupt,  the  builder  of  the  Hoosac  Tunnel,  struggled 


40  THE  AGE  OF  BIG  BUSINESS 

against  bankruptcy,  strikes,  railroad  opposition, 
and  hostile  legislatures,  in  their  attempts  to  push 
their  pipe  line  to  the  sea.  In  1879  the  Tidewater 
Company  first  began  to  pump  their  oil,  and  the 
American  press  hailed  their  achievement  as  some 
thing  that  ranked  with  the  laying  of  the  Atlantic 
Cable  and  the  construction  of  the  Brooklyn  Bridge. 
But  in  less  than  two  years  the  Rockefeller  interest 
had  entered  into  agreements  with  the  Tidewater 
Company  that  practically  placed  this  great  sea 
board  pipe  line  in  its  hands. 

Thus  in  less  than  ten  years  Rockefeller  had 
realized  his  ambitious  dream;  he  now  controlled 
practically  everything  concerned  in  the  manufac 
ture  and  sale  of  petroleum.  The  change  had  come 
about  so  stealthily,  so  secretly,  and  even  so  re 
morselessly  that  it  impressed  the  public  almost  as 
the  work  of  some  uncanny  genius.  What  were  the 
forces,  personal  and  economic,  that  had  produced 
this  new  phenomenon  in  our  business  life?  In  cer 
tain  particulars  the  Standard  Oil  monopoly  was  the 
product  of  well-understood  principles.  From  his 
earliest  days  John  D.  Rockefeller  had  struggled  to 
eliminate  the  middleman.  He  established  factories 
to  build  his  own  barrels,  to  make  his  own  acids ;  he 
created  his  own  selling  firms,  and,  instead  of  paying 


THE  FIRST  GREAT  AMERICAN  TRUST  41 

large  storage  charges,  he  constructed  his  own  ware 
houses  in  New  York.  From  his  earliest  days  as  a 
refiner,  he  had  adopted  the  principle  of  paying  no 
man  a  profit,  and  of  performing  all  the  intermediate 
acts  that  had  formerly  resulted  in  large  tribute 
to  middlemen.  Moreover,  the  Standard  Oil  Com 
pany  was  apparently  the  first  great  American  in 
dustrial  enterprise  that  realized  the  necessity  of 
operating  with  an  abundant  capital.  Not  the  least 
of  Mr.  Rockefeller's  achievements  was  his  success 
in  associating  with  the  new  company  men  having 
great  financial  standing  —  Amasa  Stone,  Benjamin 
Brewster,  Oliver  Jennings,  and  the  like,  capitalists 
whose  banking  resources,  placed  at  the  disposi 
tion  of  the  Standard,  gave  it  an  immense  advan 
tage  over  its  rivals.  While  his  competitors  were 
"kiting"  checks  and  waiting,  hat  in  hand,  on  the 
good  nature  of  the  money  lenders,  Rockefeller  al 
ways  had  a  large  bank  balance,  upon  which  he 
could  instantly  draw  for  his  operations. 

Nor  must  we  overlook  the  fact  that  the  Standard 
group  contained  a  large  number  of  exceedingly  able 
men.  "They  are  mighty  smart  men, "  said  the  de 
spairing  W.  H.  Vanderbilt,  in  1879,  when  pressed 
to  give  his  reasons  for  granting  rebates  to  the 
Rockefeller  group .  "I  guess  if  you  ever  had  to  deal 


42  THE  AGE  OF  BIG  BUSINESS 

with  them  you  would  find  that  out. "  In  Rocke 
feller  the  corporation  possessed  a  man  of  tireless 
industry  and  unshakable  determination.  Nothing 
could  turn  him  aside  from  the  work  to  which  he  had 
put  his  hand.  Public  criticism  and  even  denuncia 
tion,  while  he  resented  it  as  unjust  and  regarded  it 
as  the  product  of  a  general  misunderstanding,  never 
caused  the  leader  of  Standard  Oil  even  momenta 
rily  to  flinch.  He  was  a  man  of  one  idea,  and  he 
worked  at  it  day  and  night,  taking  no  rest  or  recrea 
tion,  skillfully  turning  to  his  purpose  every  little 
advantage  that  came  his  way.  His  associates  — 
men  like  Flagler,  Archbold,  and  Rogers  —  also  had 
unusual  talents,  and  together  they  built  up  the 
splendid  organization  that  still  exists.  They  ex 
acted  from  their  subordinates  the  last  ounce  of  at 
tention  and  energy  and  they  rewarded  generously 
everybody  who  served  them  well.  They  showed 
great  judgment  in  establishing  refineries  at  the 
most  strategic  points  and  in  giving  up  localities, 
such  as  Boston  and  Portland,  which  were  too  far 
removed  from  their  supplies.  They  established  a 
marketing  system  which  enabled  them  to  bring 
their  oil  directly  from  their  own  refineries  to  the  re 
tailer,  all  in  their  own  tank  cars  and  tank  wagons. 
They  extended  their  markets  in  foreign  countries, 


THE  FIRST  GREAT  AMERICAN  TRUST  43 

so  that  now  the  Standard  sells  the  larger  part  of  its 
products  outside  the  United  States.  They  estab 
lished  chemical  research  laboratories  which  devised 
new  and  inexpensive  methods  for  refining  the  pro 
duct  and  developed  invaluable  by-products,  such 
as  paraffin,  naphtha,  vaseline,  and  lubricating  oils. 
It  is  impossible  to  study  the  career  of  the  Standard 
Oil  Company  without  concluding  that  we  have 
here  an  example  of  a  supreme  business  intelligence 
working  in  a  field  which  gave  the  widest  possible 
scope  of  action. 

A  high  quality  of  organization,  however,  does  not 
completely  explain  the  growth  of  this  monopoly. 
The  Standard  Oil  Company  was  the  beneficiary  of 
methods  that  have  deservedly  received  great  public 
opprobrium.  Of  these  the  one  that  stands  forth 
most  conspicuously  is  the  railroad  rebate.  Those 
who  have  attempted  to  trace  the  very  origin  of  the 
Rockefeller  preeminence  to  railroad  discrimination 
have  not  entirely  succeeded.  Only  the  most  hazy 
evidence  exists  that  the  firm  of  Rockefeller,  An 
drews,  and  Flagler  greatly  profited  from  rebates. 
In  fact,  refined  oil  was  not  transported  from  Cleve 
land  to  the  seaboard  by  railroad  until  1870,  the 
year  that  this  firm  dissolved;  practically  all  of  the 
product  then  went  by  way  of  the  Great  Lakes  and 


44  THE  AGE  OF  BIG  BUSINESS 

the  Erie  Canal.  Possibly  the  Rockefeller  firm  did 
get  occasional  rebates  on  crude  oil  from  the  oil 
regions  to  the  refineries,  but  so  did  their  competi 
tors.  It  is  therefore  not  likely  that  such  favors  had 
great  influence  in  making  this  single  firm  the  most 
successful  in  the  largest  refining  center.  With  the 
organization  of  the  Standard  Oil  Company,  how 
ever,  rebates  became  a  more  important  consider 
ation. 

The  turning-point  in  the  history  of  the  oil  indus 
try  came  when  the  Rockefeller  interests  acquired 
the  Cleveland  refineries.  The  details  concerning 
this  act  of  generalship  are  fairly  well  known.  The 
South  Improvement  Company  is  a  corporation 
that  necessarily  bulks  large  in  the  history  of  the 
Standard  Oil.  Mr.  Rockefeller  and  his  associates 
have  always  disclaimed  the  parentage  of  this  or 
ganization.  They  assert  —  and  their  assertion  is 
doubtless  true  —  that  the  only  responsible  beget 
ters  were  Thomas  A.  Scott,  President  of  the  Penn 
sylvania  Railroad,  and  certain  refineries  in  Pitts 
burgh  and  Philadelphia  which,  though  they  were 
afterwards  absorbed  by  the  Standard,  were  at  that 
time  their  competitors.  These  refiners  and  the 
Pennsylvania,  over  which  the  Standard  Oil  then 
was  making  no  shipments,  thus  represented  a  group, 


THE  FIRST  GREAT  AMERICAN  TRUST  45 

composed  of  railroads  and  refiners,  which  was  an 
tagonistic  to  the  Rockefeller  interests.  The  South 
Improvement  Company  was  an  association  of  re 
finers  with  which  the  railroads,  chiefly  the  Pennsyl 
vania,  the  New  York  Central,  and  the  Erie,  made 
exclusive  contracts  for  shipping  oil.  Under  these 
contracts  rates  to  the  seaboard  were  to  be  gener 
ally  raised,  though  the  members  of  the  South  Im 
provement  Company  were  to  receive  liberal  re 
bates.  The  refiners  of  Cleveland  and  Pittsburgh 
were  to  get  lower  rates  than  the  refiners  located 
in  the  oil  regions.  But  the  clause  in  these  con 
tracts  that  caused  the  greatest  amazement  and 
indignation  was  one  which  gave  the  inside  group 
rebates  on  every  barrel  of  oil  shipped  by  its 
competitors. 

It  would  be  difficult  to  imagine  any  transaction 
more  wicked  than  these  contracts.  Carried  into 
execution  they  inevitably  meant  the  extinction  of 
every  refiner  who  had  not  been  admitted  into  the 
inside  ring.  Of  the  two  thousand  shares  of  the 
South  Improvement  Company,  the  gentlemen  who 
were  at  that  time  most  conspicuously  identified 
with  the  Standard  Oil  Company  subscribed  to  five 
hundred  and  forty.  Mr.  Rockefeller  has  always 
protested  that  he  did  not  favor  the  scheme  and  that 


46  THE  AGE  OF  BIG  BUSINESS 

he  became  a  party  to  it  simply  because  he  could  not 
afford  to  antagonize  the  powerful  Pennsylvania 
Railroad,  which  had  originated  it.  When  the  de 
tails  became  public  property,  a  wave  of  indignation 
swept  from  the  Atlantic  to  the  Pacific;  the  oil 
regions,  which  would  have  been  the  heaviest  suffer 
ers,  shut  down  their  wells  and  so  cut  off  the  supply 
of  crude  oil;  the  New  York  newspapers  started  a 
"crusade"  against  the  South  Improvement  group 
and  Congress  ordered  an  investigation.  So  fiercely 
was  the  public  wrath  aroused  that  the  railroads  ran 
to  cover,  abrogated  the  contracts,  signed  an  agree 
ment  promising  never  more  to  grant  rebates  to  any 
one,  while  the  Pennsylvania  Legislature  repealed 
the  charter  of  the  South  Improvement  Company. 
This  particular  scheme,  therefore,  never  came  to 
maturity. 

Before  the  South  Improvement  Company  ended 
its  corporate  existence,  however,  a  great  change 
had  taken  place  in  the  oil  situation.  Practically  all 
the  refineries  in  Cleveland  had  passed  into  the  con 
trol  of  the  Standard  Oil  Company.  The  Standard 
has  always  denied  that  there  was  any  connection 
between  the  purchase  of  these  great  refineries  and 
the  organization  of  the  South  Improvement  Com 
pany.  But  there  is  much  evidence  sustaining  a 


THE  FIRST  GREAT  AMERICAN  TRUST  47 

contrary  view,  for  many  of  these  refiners  afterward 
went  on  the  witness  stand  and  told  circumstantial 
stories,  all  of  which  made  precisely  the  same  point. 
This  was  that  the  Standard  men  had  come  to  them, 
shown  the  contracts  which  had  been  made  by  the 
South  Improvement  Company,  and  argued  that, 
under  these  new  conditions,  the  refineries  left  out 
side  the  combination  could  not  long  survive.  The 
Standard's  rivals  were  therefore  urged  to  "come 
in,"  to  take  Standard  stock  in  return  for  their 
refineries,  or,  if  they  preferred,  to  sell  outright. 
Practically  all  saw  the  force  in  this  argument  and 
sold  —  in  most  cases  taking  cash. 

The  acquisition  of  these  Cleveland  refineries 
made  inevitable  the  Rockefeller  conquest  of  the  oil 
industry.  Up  to  that  time  the  Standard  had  re 
fined  about  fifteen  hundred  barrels  a  day,  and  now 
suddenly  its  capacity  jumped  to  more  than  twelve 
thousand  barrels.  This  one  strategic  move  had 
made  Rockefeller  master  of  about  one-third  of  all 
the  oil  business  in  the  United  States,  and  this  fact 
explains  the  rapidity  with  which  the  other  citadels 
fell.  There  is  no  evidence  that  the  Standard  exer 
cised  any  pressure  upon  the  great  refineries  in  New 
York,  Pittsburgh,  and  Philadelphia.  Indeed  these 
concerns  manifested  an  eagerness  to  join.  The 


48  THE  AGE  OF  BIG  BUSINESS 

fact  that,  unlike  the  Cleveland  refiners,  many  of 
the  firms  in  these  other  cities  took  Standard  stock, 
and  so  became  parts  of  the  new  organization,  is 
in  itself  significant.  They  evidently  realized  that 
they  were  casting  their  fortunes  with  the  winning 
side.  The  huge  shipments  which  the  Standard  now 
controlled  explain  this  change  in  front.  Every  day 
Mr.  Rockefeller  could  send  from  Cleveland  to  the 
seaboard  a  train,  sixty  cars  long,  loaded  with 
the  blue  barrels  containing  his  celebrated  liquid. 
That  was  a  consideration  for  which  any  railroad 
would  at  that  time  sell  its  soul.  And  the  New 
York  Central  road  promptly  made  this  sacrifice. 
Hardly  had  the  ink  dried  on  its  written  promise 
not  to  grant  any  rebates  when  it  began  granting 
them  to  the  Standard  Oil  Company. 

In  those  days  the  railroad  rate  was  not  the  sa 
cred,  immutable  thing  which  it  subsequently  be 
came,  although  the  argument  for  equal  treatment 
of  shippers  existed  theoretically  just  as  strongly 
forty  years  ago  as  it  does  today.  The  rebate 
was  just  as  illegal  then  as  it  is  at  present;  there 
was  no  precise  statute,  it  is  true,  which  made  it 
unlawful  until  the  Interstate  Commerce  Act  was 
passed  in  1887;  but  the  common  law  had  always 
prohibited  such  discriminations.  In  the  seventies 


THE  FIRST  GREAT  AMERICAN  TRUST  49 

and  eighties,  however,  railroad  men  like  Cornelius 
Vanderbilt  and  Thomas  A.  Scott  were  less  inter 
ested  in  legal  formalities  than  in  getting  freight. 
They  regarded  transportation  as  a  commodity  to 
be  bought  and  sold,  like  so  much  sugar  or  wheat  or 
coal,  and  they  believed  that  the  ordinary  principles 
which  regulated  private  bargaining  should  also 
regulate  the  sale  of  the  article  in  which  they  dealt. 
According  to  this  reasoning,  which  was  utterly  false 
and  iniquitous,  but  generally  prevalent  at  the  time, 
the  man  who  shipped  the  largest  quantities  of  oil 
should  get  the  lowest  rate. 

The  purchase  of  the  Cleveland  refineries  made 
the  Standard  Oil  group  the  largest  shippers  and 
therefore  they  obtained  the  most  advantageous 
terms  for  transporting  their  product.  Under  these 
conditions  they  naturally  obtained  the  monopoly, 
the  extent  of  which  has  been  already  described. 
Their  competitors  could  rage,  hold  public  meetings, 
start  riots,  threaten  to  lynch  Mr.  Rockefeller  and 
all  his  associates,  but  they  could  not  long  survive 
in  face  of  these  advantages.  The  only  way  in  which 
the  smaller  shippers  could  overcome  this  handicap 
was  by  acquiring  new  methods  of  transportation. 
It  was  this  necessity  that  inspired  the  construction 
of  pipe  lines;  but  the  Standard,  as  already  de- 


50  THE  AGE  OF  BIG  BUSINESS 

scribed,  succeeded  in  absorbing  these  just  about 
as  rapidly  as  they  were  constructed. 

Not  only  did  the  Standard  obtain  railroad  re 
bates  but  it  developed  the  most  death-dealing 
methods  in  its  system  of  marketing  its  oil.  In  these 
campaigns  it  certainly  overstepped  the  boundaries 
of  legitimate  business,  even  according  to  the  pre 
vailing  morals  of  its  own  or  of  any  other  time. 
While  it  probably  did  not  set  fire  to  rival  refineries, 
as  it  has  sometimes  been  accused  of  doing,  it  un 
doubtedly  did  resort  to  somewhat  Prussian  meth 
ods  of  destroying  the  foe.  This  great  corpora 
tion  divided  the  United  States  into  several  sections, 
over  each  of  which  it  appointed  an  agent,  who  in 
turn  subdivided  his  territory  into  smaller  divisions, 
each  one  of  which  likewise  had  its  captain.  The 
order  imperatively  issued  to  each  agent  was,  "Sell 
all  the  oil  that  is  sold  in  your  district. "  To  these 
instructions  he  was  rigidly  held;  success  in  accom 
plishing  his  task  meant  advancement  and  an  in 
creased  salary,  with  a  liberal  pension  in  his  old  age, 
whereas  failure  meant  a  pitiless  dismissal.  He  was 
expected  to  supervise  not  only  his  own  business, 
but  that  of  his  rivals  as  well,  to  obtain  access 
to  their  accounts,  their  shipments,  and  their 
customers.  It  has  been  asserted,  and  the  assertion 


THE  FIRST  GREAT  AMERICAN  TRUST  51 

has  been  supported  by  considerable  evidence,  that 
these  agents  did  not  hesitate  to  bribe  railroad  em 
ployees  and  in  this  way  get  access  to  their  competi 
tors'  bills  of  lading  and  records  of  their  shipments, 
and  that  they  would  even  bribe  dealers  to  cancel 
such  orders  and  take  the  oil  from  them  at  a  lower 
price.  This  information  laid  the  foundation  for 
those  price-cutting  campaigns  that  have  brought 
the  name  of  the  Standard  Oil  into  such  disfavor. 
And  when  the  Standard  cut,  it  cut  to  kill;  the  only 
purpose  was  to  drive  the  competitor  from  the  field, 
and,  when  this  had  been  accomplished,  the  price 
of  oil  would  promptly  go  up  again.  The  organiza 
tion  of  "bogus  companies,"  started  purely  for  the 
purpose  of  eliminating  competitors,  seems  to  have 
been  a  not  infrequent  practice.  This  latter  method 
emphasizes  another  quality  that  accompanied  the 
Standard's  operations  and  so  largely  explains  its 
unpopularity  —  the  secrecy  with  which  it  so  com 
monly  worked.  Though  the  independent  oil  re 
finers  were  combating  the  most  powerful  financial 
power  of  the  time,  they  were  frequently  fighting  in 
the  dark,  never  knowing  where  to  deliver  their 
blows. 

This  same  characteristic  was  manifested  in  the 
form  of  corporate  existence  which  the  Standard 


5£  THE  AGE  OF  BIG  BUSINESS 

adopted.  The  first  great  "trust"  was  a  trust  not 
only  in  name  but  in  fact.  The  Standard  introduced 
not  only  a  new  economic  development  into  our  na 
tional  organization ;  it  introduced  a  new  word  into 
our  language  and  an  issue  into  American  politics 
that  provided  sustenance  for  the  presidential  cam 
paigns  of  twenty-five  years.  From  the  beginning 
the  Standard  Oil  had  always  been  a  close  corpora 
tion.  Originally  it  had  had  only  ten  stockhold 
ers,  and  this  number  had  gradually  grown  until, 
in  1881,  there  were  forty-one.  These  men  had 
adopted  a  new  and  secretive  method  of  combining 
their  increasing  possessions  into  a  single  ownership. 
In  1873  the  Standard  Company  had  increased  its 
capital  stock  (originally  $1,000,000)  to  $3,500,000, 
the  new  certificates  being  exchanged  for  interests 
in  the  great  New  York  and  Philadelphia  refineries. 
The  Standard  Oil  Company  of  Ohio  never  had  a 
larger  capital  stock  than  that.  As  additional  prop 
erties  were  acquired,  the  interests  were  placed  in 
the  hands  of  trustees,  who  held  them  for  the  joint 
benefit  of  the  stockholders  in  the  original  company. 
In  1882  this  idea  was  carried  further,  for  then  the 
Standard  Oil  Trust  was  organized.  The  fact  that 
the  properties  lay  in  so  many  different  States,  many 
of  which  had  laws  intended  to  curb  corporations, 


/ 


THE  FIRST  GREAT  AMERICAN  TRUST  53 

was  evidently  what  led  to  this  form  of  consolida 
tion.  A  trust  was  formed,  consisting  of  nine  trus 
tees,  who  held,  for  the  benefit  of  the  Standard  Oil 
stockholders,  all  the  stock  in  the  Standard  and  in 
the  subsidiary  companies.  Instead  of  certificates 
of  stock  the  trustees  issued  certificates  of  trust 
amounting  to  $70,000,000.  Each  Standard  stock 
holder  received  twenty  of  these  certificates  for  each 
share  which  he  held  of  Standard  stock.  These 
certificates  could  be  bought  and  sold  and  passed 
on  by  inheritance  precisely  the  same  as  stocks. 

Ingenious  as  was  this  legal  device,  it  did  not 
stand  the  test  of  the  courts.  In  1892  the  Ohio 
Supreme  Court  declared  the  Standard  Oil  Trust  a 
violation  of  the  law  and  demanded  its  dissolution. 
The  persistent  attempts  of  the  Standard  to  disre 
gard  this  order  increased  its  reputation  for  law 
lessness.  Finally,  in  1899,  after  Ohio  had  brought 
another  action,  the  trust  was  dissolved.  The 
Standard  interests  now  reorganized  all  their  hold 
ings  under  the  name  of  the  Standard  Oil  Company 
of  New  Jersey.  Again,  in  1911,  the  United  States 
Supreme  Court  declared  this  combination  a  viola 
tion  of  the  Sherman  Anti-Trust  Act,  and  ordered  its 
dissolution.  By  this  time  the  Standard  capitalists 
had  learned  the  value  of  public  opinion  as  a  corpo- 


54  THE  AGE  OF  BIG  BUSINESS 

rate  asset,  and  made  no  attempt  to  evade  the  order 
of  the  court.  The  Standard  Oil  Company  of  New 
Jersey  proceeded  to  apportion  among  its  stock 
holders  the  stock  which  it  held  in  thirty -seven  other 
companies  —  refineries,  pipe  lines,  producing  com 
panies,  marketing  companies,  and  the  like.  Chief 
Justice  White,  in  rendering  his  decision,  specifically 
ordered  that,  in  dissolving  their  combination,  the 
Standard  should  make  no  agreement,  contractual 
or  implied,  which  was  intended  still  to  retain  their 
properties  in  one  ownership.  As  less  than  a  dozen 
men  owned  a  majority  interest  in  the  Standard  Oil 
Company  of  New  Jersey,  these  same  men  naturally 
continued  to  own  a  majority  interest  in  the  sub 
sidiary  companies.  Though  the  immediate  effect 
of  this  famous  decision  therefore  was  not  to  cause 
a  separation  in  fact,  this  does  not  signify  that,  as 
time  goes  on,  such  a  real  dissolution  will  not  take 
place.  It  is  not  unlikely  that,  in  a  few  years,  the 
transfers  of  the  stock  by  inheritance  or  sale  will 
weaken  the  consolidated  interest  to  a  point  where 
the  companies  that  made  up  the  Standard  Com 
pany  will  be  distinct  and  competitive. 

This  is  more  likely  to  be  the  case  since,  long  before 
the  decision  of  1911,  the  Standard  Oil  Company 
had  ceased  to  be  a  monopoly.  In  the  early  nine- 


THE  FIRST  GREAT  AMERICAN  TRUST  55 

ties  there  came  to  the  front  in  the  oil  regions 
a  man  whose  organizing  ability  and  indomitable 
will  suggested  the  Standard  Oil  leaders  themselves. 
This  man's  soul  burned  with  an  intense  hatred  of 
the  Rockefeller  group,  and  this  sentiment,  as  much 
as  his  love  of  success,  inspired  all  his  efforts.  There 
is  nothing  finer  in  American  business  history  than 
the  fifteen  years'  battle  which  Lewis  Emery,  Jr., 
fought  against  the  greatest  financial  power  of  the 
day.  In  1901  this  long  struggle  met  with  com 
plete  success.  Its  monuments  were  the  two  great 
trunk  pipe  lines  which  Emery  had  built  from 
the  Pennsylvania  regions  to  Marcus  Hook,  near 
Philadelphia,  one  for  pumping  refined  and  one  for 
pumping  crude.  The  Pure  Oil  Company,  Emery's 
creation,  has  survived  all  its  trials  and  has  done 
an  excellent  business.  And  meanwhile  other  inde 
pendents  sprang  up  with  the  discovery  of  oil  in 
other  parts  of  the  country.  This  discovery  first 
astonished  the  Standard  Oil  men  themselves;  when 
someone  suggested  to  Archbold,  thirty-five  years 
ago,  that  the  mid-continent  field  probably  con 
tained  large  oil  supplies,  he  laughed,  and  said  that 
he  would  drink  all  the  oil  ever  discovered  outside 
of  Pennsylvania.  In  these  days  a  haunting  fear 
pursued  the  oil  men  that  the  Pennsylvania  field 


56  THE  AGE  OF  BIG  BUSINESS 

would  be  exhausted  and  that  their  business  would 
be  ended.  This  fear,  as  developments  showed,  had 
a  substantial  basis;  the  Pennsylvania  yield  began  to 
fail  in  the  eighties  and  nineties,  until  now  it  is  an 
inconsiderable  element  in  this  gigantic  industry. 
Ohio,  Indiana,  Illinois,  Kansas,  Oklahoma,  Texas, 
California,  and  other  States  in  turn  became  the 
scene  of  the  same  exciting  and  adventurous  events 
that  had  followed  the  discovery  of  oil  in  Pennsyl 
vania.  The  Standard  promptly  extended  its  pipe 
lines  into  these  new  areas,  but  other  great  com 
panies  also  took  part  in  the  development.  These 
companies,  such  as  the  Gulf  Refining  Company 
and  the  Texas  Refining  Company,  have  their  gath 
ering  pipe  lines,  their  great  trunk  lines,  their  mar 
keting  stations,  and  their  export  trade,  like  the 
Standard;  the  Pure  Oil  Company  has  its  tank  cars, 
its  tank  ships,  and  its  barges  on  the  great  rivers  of 
Europe.  The  ending  of  the  rebate  system  has 
stimulated  the  growth  of  independents,  and  the 
production  of  crude  oil  and  the  market  demand  in  a 
thousand  directions  has  increased  the  business  to 
an  extent  which  is  now  far  beyond  the  ability  of 
any  one  corporation  to  monopolize.  The  Standard 
interests  refine  perhaps  something  more  than  fifty 
per  cent  of  the  crude  oil  produced  in  this  country. 


THE  FIRST  GREAT  AMERICAN  TRUST  57 

But  in  recent  years,  Standard  Oil  has  meant  more 
than  a  corporation  dealing  in  this  natural  product. 
It  has  become  the  synonym  of  a  vast  financial  power 
reaching  in  all  directions.  The  enormous  profits 
made  by  the  Rockefeller  group  have  found  invest 
ments  in  other  fields.  The  Rockefellers  became 
the  owners  of  the  great  Mesaba  iron  ore  range 
in  Minnesota  and  of  the  Colorado  Fuel  and  Iron 
Company,  the  chief  competitor  of  United  States 
Steel.  It  is  the  largest  factor  in  several  of  the 
greatest  American  banks.  Above  all,  it  is  the  single 
largest  railroad  power  in  America  today. 


CHAPTER  III 

THE  EPIC  OF  STEEL 

IT  was  the  boast  of  a  Roman  Emperor  that  he  had 
found  the  Eternal  City  brick  and  left  it  marble. 
Similarly  the  present  generation  of  Americans  in 
herited  a  country  which  was  wood  and  have  trans 
formed  it  into  steel.  That  which  chiefly  distin 
guishes  the  physical  America  of  today  from  that 
of  forty  years  ago  is  the  extensive  use  of  this 
metal.  Our  fathers  used  steel  very  little  in  railway 
transportation ;  rails  and  locomotives  were  usually 
made  of  iron,  and  wood  was  the  prevailing  material 
for  railroad  bridges.  Steel  cars,  both  for  passen 
gers  and  for  freight,  are  now  everywhere  taking  the 
place  of  the  more  flimsy  substance.  We  travel 
today  in  steel  subways,  transact  our  business  in 
steel  buildings,  and  live  in  apartments  and  private 
houses  which  are  made  largely  of  steel.  The  steel 
automobile  has  long  since  supplanted  the  wooden 
carriage;  the  steel  ship  has  displaced  the  iron 

58 


THE  EPIC  OF  STEEL  59 

and  wooden  vessel.  The  American  farmer  now 
encloses  his  lands  with  steel  wire,  the  Southern 
planter  binds  his  cotton  with  steel  ties,  and  modern 
America  could  never  gather  her  abundant  harvests 
without  her  mighty  agricultural  implements,  all 
of  which  are  made  of  steel.  Thus  it  is  steel  that 
shelters  us,  that  transports  us,  that  feeds  us,  and 
that  even  clothes  us. 

This  substance  is  such  a  commonplace  element 
in  our  lives  that  we  take  it  for  granted,  like  air  and 
water  and  the  soil  itself;  yet  the  generation  that 
fought  the  Civil  War  knew  practically  nothing  of 
steel.  They  were  familiar  with  this  metal  only  as 
a  curiosity  or  as  a  material  used  for  the  finer  kinds 
of  cutlery.  How  many  Americans  realize  that  steel 
was  used  even  less  in  1865  than  aluminum  is  used 
today?  Nearly  all  the  men  who  have  made  the 
American  Steel  Age  —  such  as  Carnegie,  Phipps, 
Frick,  and  Schwab  —  are  still  living  and  some  of 
them  are  even  now  extremely  active.  Thirty-five 
years  ago  steel  manufacture  was  regarded,  even  in 
this  country,  as  an  almost  exclusively  British  in 
dustry.  In  1870  the  American  steel  maker  was 
the  parvenu  of  the  trade.  American  railroads  pur 
chased  their  first  steel  rails  in  England,  and  the 
early  American  steel  makers  went  to  Sheffield  for 


60  THE  AGE  OF  BIG  BUSINESS 

their  expert  workmen.  Yet,  in  little  more  than  ten 
years,  American  mills  were  selling  agricultural  ma 
chinery  in  that  same  English  town,  American  rails 
were  displacing  the  English  product  in  all  parts 
of  the  world,  American  locomotives  were  draw 
ing  English  trains  on  English  railways,  and  Amer 
ican  steel  bridges  were  spanning  the  Ganges  and 
the  Nile.  Indeed,  the  United  States  soon  sur 
passed  England.  In  the  year  before  the  World 
War  the  United  Kingdom  produced  7,500,000  tons 
of  steel  a  year,  while  the  United  States  produced 
32,000,000  tons.  Since  the  outbreak  of  the  Great 
War,  the  United  States  has  probably  made  more 
steel  than  all  the  rest  of  the  world  put  together. 
"The  nation  that  makes  the  cheapest  steel,"  says 
Mr.  Carnegie,  "has  the  other  nations  at  its  feet. " 
When  some  future  Buckle  analyzes  the  funda 
mental  facts  in  the  World  War,  he  may  possibly 
find  that  steel  precipitated  it  and  that  steel  de 
termined  its  outcome. 

Three  circumstances  contributed  to  the  rise  of 
this  greatest  of  American  industries :  a  new  process 
for  cheaply  converting  molten  pig  iron  into  steel, 
the  discovery  of  enormous  deposits  of  ore  in  several 
sections  of  the  United  States,  and  the  entrance  into 
the  business  of  a  hardy  and  adventurous  group  of 


THE  EPIC  OF  STEEL  61 

manufacturers  and  business  men.  Our  steel  in 
dustry  is  thus  another  triumph  of  American  inven 
tive  skill,  made  possible  by  the  richness  of  our  min 
eral  resources  and  the  racial  energy  of  our  people. 
An  elementary  scientific  discovery  introduced  the 
great  steel  age.  Steel,  of  course,  is  merely  iron 
which  has  been  refined  —  freed  from  certain  im 
purities,  such  as  carbon,  sulphur,  and  phosphorus. 
We  refine  our  iron  and  turn  it  into  steel  precisely 
as  we  refine  our  sugar  and  petroleum.  From  the 
days  of  Tubal  Cain  the  iron  worker  had  known  that 
heat  would  accomplish  this  purification;  but  heat, 
up  to  almost  1865,  was  an  exceedingly  expensive 
commodity.  For  ages  iron  workers  had  obtained 
the  finer  metal  by  applying  this  heat  in  the  form 
of  charcoal,  never  once  realizing  that  unlimited 
quantities  of  another  fuel  existed  on  every  hand. 
The  man  who  first  suggested  that  so  commonplace 
a  substance  as  air,  blown  upon  molten  pig  iron, 
would  produce  the  intensest  heat  and  destroy  its 
impurities,  made  possible  our  steel  railroads,  our 
steel  ships,  and  our  steel  cities.  When  William 
Kelly,  an  owner  of  iron  works  near  Eddy ville,  Ken 
tucky,  first  proposed  this  method  in  1847,  he  met 
with  the  ridicule  which  usually  greets  the  pioneer 
inventor.  When  Henry  Bessemer,  several  years 


6S  THE  AGE  OF  BIG  BUSINESS 

afterward,  read  a  paper  before  the  British  Associa 
tion  for  the  Advancement  of  Science,  in  which  he 
advocated  the  same  principle,  he  was  roared  down 
as  "a  crazy  Frenchman,"  and  the  savants  were  so 
humiliated  by  the  suggestion  that  they  voted  to 
make  no  record  of  his  "silly  paper"  in  their  official 
minutes.  Yet  these  two  men,  the  American  Kelly 
and  the  Englishman  Bessemer,  were  the  creators  of 
modern  steel.  The  records  of  the  American  Patent 
Office  clearly  show  that  Kelly  made  "Bessemer" 
steel  many  years  before  Bessemer.  In  1870  the 
American  Government  refused  to  extend  Besse- 
mer's  patent  in  this  country  on  the  ground  that 
William  Kelly  had  a  prior  claim;  in  spite  of  this, 
Bessemer  was  undoubtedly  the  man  who  developed 
the  mechanical  details  and  gave  the  process  a  uni 
versal  standing. 

Though  the  Bessemer  process  made  possible  the 
production  of  steel  by  tons  instead  of  by  pounds,  it 
would  never  in  itself  have  given  the  nation  its  pres 
ent  preeminence  in  the  steel  industry.  Iron  had 
been  mined  in  the  United  States  for  two  centuries 
on  a  small  scale,  the  main  deposits  being  located  in 
the  Lake  Champlain  region  of  New  York  and  in 
western  Pennsylvania.  But  these,  and  a  hundred 
other  places  located  along  the  Atlantic  coast,  could 


THE  EPIC  OF  STEEL  63 

not  have  produced  ore  in  quantities  sufficient  to 
satisfy  the  yawning  jaws  of  the  Bessemer  convert 
ers.  As  this  new  method  poured  out  the  liquid  in 
thousands  of  tons,  and  as  the  commercial  demand 
extended  in  a  dozen  different  directions,  the  cry 
went  up  from  the  furnaces  for  more  ore.  And 
again  Nature,  which  has  favored  America  in  so 
many  directions,  came  to  her  assistance.  Manu 
facturers  in  the  steel  regions  began  to  recall  strange 
stories  which  had  been  floating  down  for  many 
years  from  the  wilderness  surrounding  Lake  Supe 
rior.  The  recollection  of  a  famous  voyage  made  in 
this  region  by  Philo  M.  Everett,  as  far  back  as  1845, 
now  laid  siege  to  the  imagination  of  the  new  gener 
ation  of  ironmasters.  For  years  the  Indians  had 
told  Everett  of  the  "mountains  of  iron  "  that  lay  on 
the  Minnesota  shore  of  Lake  Superior  and  had  de 
scribed  their  wonders  in  words  that  finally  impelled 
this  hardy  adventurer  to  make  a  voyage  of  explora 
tion.  For  six  weeks,  in  company  with  two  Indian 
guides,  Everett  had  navigated  a  small  boat  along 
the  shores  of  the  Lake,  covering  a  distance  that 
now  takes  only  a  few  hours.  The  Indians  had  long 
regarded  this  silent,  red  iron  region  with  a  super 
stitious  reverence,  and  now,  as  the  little  party  ap 
proached,  they  refused  to  complete  the  journey. 


64  THE  AGE  OF  BIG  BUSINESS 

"Iron  Mountain!"  they  said,  pointing  northward 
along  the  trail  —  "Indian  not  go  near;  white  man 
go ! "  The  sight  which  presently  met  Everett's  eyes 
repaid  him  well  for  his  solitary  tramp  in  the  forest. 
He  found  himself  face  to  face  with  a  "mountain 
a  hundred  and  fifty  feet  high,  of  solid  ore,  which 
looked  as  bright  as  a  bar  of  iron  just  broken." 
Other  explorations  subsequently  laid  open  the 
whole  of  the  Minnesota  fields,  including  the  Mesa- 
ba,  which  developed  into  the  world's  greatest  iron 
range.  America  has  other  regions  rich  in  ore,  par 
ticularly  in  Alabama,  located  alongside  the  coal 
and  limestone  so  necessary  in  steel  production;  yet 
it  has  drawn  two-thirds  of  its  whole  supply  from 
these  Lake  Superior  fields.  Not  only  the  quantity, 
which  is  apparently  limitless,  but  the  quality  ex 
plains  America's  leadership  in  steel  making. 

Mining  in  Minnesota  has  a  character  which  is 
not  duplicated  elsewhere.  When  we  think  of  an  iron 
mine,  we  naturally  picture  subterranean  caverns 
and  galleries,  and  strange,  gnome-like  creatures 
prowling  about  with  pick  and  shovel  and  drill.  But 
mining  in  this  section  is  a  much  simpler  proceed 
ing.  The  precious  mineral  does  not  lie  concealed 
deep  within  the  earth;  it  lies  practically  upon  the 
surface.  Removing  it  is  not  a  question  of  blasting 


THE  EPIC  OF  STEEL  6.5 

with  dynamite;  it  is  merely  a  matter  of  lifting  it 
from  the  surface  of  the  earth  with  a  huge  steam 
shovel.  "Miners "  in  Minnesota  have  none  of  the 
conventional  aspects  of  their  trade.  They  operate 
precisely  as  did  those  who  dug  the  Panama  Canal. 
The  railroad  cars  run  closely  to  the  gigantic  red  pit. 
A  huge  steam  shovel  opens  its  jaws,  descends  into 
an  open  amphitheater,  licks  up  five  tons  at  each 
mouthful,  and,  swinging  sideways  over  the  open 
cars,  neatly  deposits  its  booty.  It  is  not  surpris 
ing  that  ore  can  be  produced  at  lower  cost  in  the 
United  States  than  even  in  those  countries  where 
the  most  wretched  wages  are  paid.  Evidently  this 
one  iron  field,  to  say  nothing  of  others  already 
worked,  gives  a  permanence  to  our  steel  industry. 
Not  only  did  America  have  the  material  re 
sources;  what  is  even  more  important,  she  had  also 
the  men.  American  industrial  history  presents  few 
groups  more  brilliant,  more  resourceful,  and  more 
picturesque  than  that  which,  in  the  early  seven 
ties,  started  to  turn  these  Minnesota  ore  fields  in 
to  steel  —  and  into  gold.  These  men  had  all  the 
dash,  all  the  venturesomeness,  all  the  speculative 
and  even  the  gambling  instinct,  needed  for  one  of 
the  greatest  industrial  adventures  in  our  annals. 
All  had  sprung  from  the  simplest  and  humblest 


66  THE  AGE  OF  BIG  BUSINESS 

origins.  They  had  served  their  business  appren 
ticeships  as  grocery  clerks,  errand  boys,  telegraph 
messengers,  and  newspaper  gamins.  For  the  most 
part  they  had  spent  their  boyhood  together,  had 
played  with  each  other  as  children,  had  attended 
the  same  Sunday  schools,  had  sung  in  the  same 
church  choirs,  and,  as  young  men,  had  quarreled 
with  each  other  over  their  sweethearts.  The  Pitts 
burgh  group  comprised  about  forty  men,  most  of 
whom  retired  as  millionaires,  though  their  names 
for  the  most  part  signify  little  to  the  present-day 
American.  Kloman,  Coleman,  McCandless,  Shinn, 
Stewart,  Jones,  Vandervoort  —  are  all  important 
men  in  the  history  of  American  steel.  Thomas 
A.  Scott  and  J.  Edgar  Thompson,  men  associated 
chiefly  with  the  creation  of  the  Pennsylvania  Rail 
road,  also  made  their  contributions.  But  three  or 
four  men  towered  so  preeminently  above  their  as 
sociates  that  today  when  we  think  of  the  human 
agencies  that  constructed  this  mighty  edifice,  the 
names  that  insistently  come  to  mind  are  those  of 
Carnegie,  Phipps,  Frick,  and  Schwab. 

Books  have  been  written  to  discredit  Carnegie's 
work  and  to  picture  him  as  the  man  who  has  stolen 
success  from  the  labor  of  greater  men.  Yet  Carnegie 
is  the  one  member  of  a  brilliant  company  who  had 


ANDREW  CARNEGIE 

iph  by  Underwood  &  Underwood. 


THE  AGE  OP  BIG  BUSINE 

ins.  They  had  served  their  business  appren- 
ships  as  grocery  clerks,  errand  boys,  telegraph 
messengers,  and  newspaper  gamins.  For  the  most 
part  they  had  spent  their  boyhood  together,  had 
played  with  each  other  as  children,  had  attended 
the  same  Sunday  schools,  had  sung  in  the  same 
church  choirs,  and,  as  young  mem,  had  quarreled 
with  each  other  over  their  sweethearts.  The  Pitts 
burgh  group  comprised  about  forty  men,  most  of 
whom  retired  as  millionaires,  though  then*  names 
for  the  most  part  signify  little  to  the  present-day 
American.  Klo^^i^mCandless,  Shinn, 
Stewart,  ^«W*^^&WTO^ 
men  in  tfe  American  stee 

u-n  associated 

ihe  Per-  tail- 

hree  or 

four  men  towemi  * 

sociates  that  today  w!  aan 

agencies  that  <••  ed  this  the 

names  that  insistently  coni  nd  are  those  of 

Carnegie,  Phipps,  Frick,  and  Schwab. 

Books  have  been  written  to  discredit  Carnegie's 
work  and  to  picture  him  as  the  man  who  has  stolen 
success  from  the  labor  of  greater  men.  Yet  Carnegie 
is  the  one  member  of  a  brilliant  company  who  had 


THE  EPIC  OF  STEEL  67 

the  indispensable  quality  of  genius.  He  had  none 
of  the  plodding,  painstaking  qualities  of  a  Rocke 
feller;  he  had  the  fire,  the  restlessness,  the  keen  rel 
ish  for  adventure,  and  the  imagination  that  leaped 
far  in  advance  of  his  competitors  which  we  find 
so  conspicuous  in  the  older  Vanderbilt.  Carnegie 
showed  these  qualities  from  his  earliest  days. 
Driven  as  a  child  from  his  Scottish  home  by  hun 
ger,  never  having  gone  to  school  after  twelve,  he 
found  himself,  at  the  age  of  thirteen,  living  in  a 
miserable  hut  in  Allegheny,  earning  a  dollar  and 
twenty  cents  a  week  as  bobbin-boy  in  a  cotton  mill, 
while  his  mother  augmented  the  family  income 
by  taking  in  washing.  Half  a  dozen  years  later 
Thomas  Scott,  President  of  the  Pennsylvania  Rail 
road,  made  Carnegie  his  private  secretary.  How 
well  the  young  man  used  his  opportunities  in  this 
occupation  appeared  afterward  when  he  turned  his 
wide  acquaintanceship  among  railroad  men  to  prac 
tical  use  in  the  steel  business.  It  was  this  personal 
adaptability,  indeed,  that  explains  Carnegie's  suc 
cess.  In  the  narrow,  methodical  sense  he  was  not 
a  business  man  at  all ;  he  knew  and  cared  nothing 
for  its  dull  routine  and  its  labyrinthine  details.  As 
a  practical  steel  man  his  position  is  a  negligible  one. 
Though  he  was  profoundly  impressed  by  his  first 


68  THE  AGE  OF  BIG  BUSINESS 

sight  of  a  Bessemer  converter,  he  had  little  interest 
in  the  every-day  process  of  making  steel.  He  had 
also  many  personal  weaknesses:  his  egotism  was 
marked,  he  loved  applause,  he  was  always  seeking 
opportunities  for  self-exploitation,  and  he  even  as 
pired  to  fame  as  an  author  and  philosopher.  The 
staid  business  men  of  Pittsburgh  early  regarded 
Carnegie  with  disfavor;  his  daring  impressed  them 
as  rashness  and  his  bold  adventures  as  the  plung 
ing  of  the  speculator.  Yet  in  all  its  aspects  Carne 
gie's  triumph  was  a  personal  one.  He  was  perhaps 
the  greatest  commercial  traveler  this  country  has 
ever  known.  While  his  more  methodical  associ 
ates  plodded  along  making  steel,  Carnegie  went  out 
upon  the  high  way,  bringing  in  orders  by  the  millions. 
He  showed  this  same  personal  quality  in  the  organ 
ization  of  his  force.  As  a  young  man,  entirely  new 
to  the  steel  industry,  he  selected  as  the  first  man 
ager  of  his  works  Captain  Bill  Jones;  his  amazing 
judgment  was  justified  when  Jones  developed  into 
America's  greatest  practical  genius  in  making  steel. 
"Here  lies  the  man"  —  Carnegie  once  suggested 
this  line  for  his  epitaph  —  "who  knew  how  to  get 
around  him  men  who  were  cleverer  than  himself. " 
Carnegie  inspired  these  men  with  his  own  energy  and 
restlessness;  the  spirit  of  the  whole  establishment 


THE  EPIC  OF  STEEL  69 

automatically  became  that  of  the  pushing  spirit 
of  its  head.  This  little  giant  became  the  most  re 
morseless  pace-maker  in  the  steel  regions.  How 
ever  astounding  might  be  the  results  obtained  by 
the  Carnegie  works  the  captain  at  the  head  was 
never  satisfied.  As  each  month's  output  sur 
passed  that  which  had  gone  before,  Carnegie  always 
came  back  with  the  same  cry  of  "More."  "We 
broke  all  records  for  making  steel  last  week!"  a  de 
lighted  superintendent  once  wired  him  and  imme 
diately  he  received  his  answer,  "Congratulations. 
Why  not  do  it  every  week?"  This  spirit  explains 
the  success  of  the  Carnegie  Company  in  outdis 
tancing  all  its  competitors  and  gaining  a  world 
wide  preeminence  for  the  Pittsburgh  district.  But 
Carnegie  did  not  make  the  mistake  of  capitalizing 
all  this  prosperity  for  himself;  his  real  greatness  as 
an  American  business  man  consists  in  the  fact  that 
he  liberally  shared  the  profits  with  his  associates. 
Ruthless  he  might  be  in  appropriating  their  last 
ounce  of  energy,  yet  he  rewarded  the  successful 
men  with  golden  partnerships.  Nothing  delighted 
Carnegie  more  than  to  see  the  man  whom  he  had 
lifted  from  a  puddler's  furnace  develop  into  a 
millionaire. 
Henry  Phipps,  still  living  at  the  age  of  seventy- 


70  THE  AGE  OF  BIG  BUSINESS 

eight,  was  the  only  one  of  Carnegie's  early  asso 
ciates  who  remained  with  him  to  the  end.  Like 
many  of  the  others,  Phipps  had  been  Carnegie's 
playmate  as  a  boy,  so  far  as  any  of  them,  in  those 
early  days,  had  opportunity  to  play;  like  all  his 
contemporaries  also,  Phipps  had  been  wretchedly 
poor,  his  earliest  business  opening  having  been  as 
messenger  boy  for  a  jeweler.  Phipps  had  none  of 
the  dash  and  sparkle  of  Carnegie.  He  was  the 
plodder,  the  bookkeeper,  the  economizer,  the  man 
who  had  an  eye  for  microscopic  details.  "What 
we  most  admired  in  young  Phipps, "  a  Pittsburgh 
banker  once  remarked,  "is  the  way  in  which  he 
could  keep  a  check  in  the  air  for  three  or  four 
days. "  His  abilities  consisted  mainly  in  keeping 
the  bankers  complaisant,  in  smoothing  the  ruf 
fled  feelings  of  creditors,  in  cutting  out  unneces 
sary  expenditures,  and  in  shaving  prices. 

Carnegie's  other  two  more  celebrated  associates, 
Henry  C.  Frick  and  Charles  M.  Schwab,  were 
younger  men.  Frick  was  cold  and  masterful,  as 
hard,  unyielding,  and  effective  as  the  steel  that 
formed  the  staple  of  his  existence.  Schwab  was 
enthusiastic,  warm-hearted,  and  happy-go-lucky; 
a  man  who  ruled  his  employees  and  obtained  his 
results  by  appealing  to  their  sympathies.  The  men 


THE  EPIC  OF  STEEL  71 

of  the  steel  yards  feared  Frick  as  much  as  they 
loved  "Charlie"  Schwab.  The  earliest  glimpses 
which  we  get  of  these  remarkable  men  suggest  cer 
tain  permanent  characteristics:  Frick  is  pictured 
as  the  sober,  industrious  bookkeeper  in  his  grand 
father's  distillery;  Schwab  as  the  rollicking,  whis 
tling  driver  of  a  stage  between  Loretto  and  Cres- 
son.  Frick  came  into  the  steel  business  as  a  mat 
ter  of  deliberate  choice,  whereas  Schwab  became 
associated  with  the  Pittsburgh  group  more  or  less 
by  accident. 

The  region  of  Connellsville  contains  almost  150 
square  miles  underlaid  with  coal  that  has  a  par 
ticular  heat  value  when  submitted  to  the  process 
known  as  coking.  As  early  as  the  late  eighties  cer 
tain  operators  had  discovered  this  fact  and  were 
coking  this  coal  on  a  small  scale.  It  is  the  highest 
tribute  to  Frick's  intelligence  that  he  alone  fore 
saw  the  part  which  this  Connellsville  coal  was  to 
play  in  building  up  the  Pittsburgh  steel  district. 
The  panic  of  1873,  which  laid  low  most  of  the 
Connellsville  operators,  proved  Frick's  opportun 
ity.  Though  he  was  only  twenty-four  years  old  he 
succeeded,  by  his  intelligence  and  earnestness,  in 
borrowing  money  to  purchase  certain  Connellsville 
mines,  then  much  depreciated  in  price.  From  that 


72  THE  AGE  OF  BIG  BUSINESS 

moment,  coke  became  Frick's  obsession,  as  steel 
had  been  Carnegie's.  With  his  early  profits  he  pur 
chased  more  coal  lands  until,  by  1889,  he  owned  ten 
thousand  coke  ovens  and  was  the  undisputed  "  coke 
king"  of  Connellsville.  Several  years  before  this, 
Carnegie  had  made  Frick  one  of  his  marshals,  coke 
having  become  indispensable  to  the  manufacture  of 
steel,  and  in  1889  the  former  distiller's  accountant 
became  Carnegie's  commander-in-chief .  Probably 
the  popular  mind  associates  Frick  chiefly  with  the 
importation  of  Slavs  as  workmen,  with  the  terrible 
strikes  that  followed  in  consequence  at  Homestead, 
with  the  murderous  attack  made  upon  him  by 
Berkman,  the  anarchist,  and  with  his  bitter,  long- 
drawn-out  quarrel  with  Andrew  Carnegie.  Frick's 
stormy  career  was  naturally  the  product  of  his 
character. 

On  the  other  hand,  temperamental  pliability 
and  lovableness  were  the  directing  traits  of  the 
man  who,  in  his  way,  made  contributions  quite  as 
solid  to  the  extension  of  the  Pittsburgh  steel  in 
dustry.  Schwab  worked  with  the  human  material 
quite  as  successfully  as  other  men  worked  with 
iron  ore,  Bessemer  furnaces,  and  coal.  He  handled 
successfully  what  was  perhaps  the  greatest  task 
hi  management  ever  presented  to  a  manufacturer 


THE  EPIC  OF  STEEL  73 

when  to  him  fell  the  job  of  reorganizing  the  Home 
stead  Works  after  the  strike  of  1892  and  of  trans 
forming  thousands  of  riotous  workmen  into  orderly 
and  interested  producers  of  steel.  In  three  or  four 
years  practically  every  man  on  the  premises  had  be 
come  "Charlie"  Schwab's  personal  friend,  and  the 
Homestead  property  which,  until  the  day  he  took 
charge,  had  been  a  colossal  failure,  had  developed 
into  one  of  the  most  profitable  holdings  of  the 
Carnegie  Company.  As  his  reward  Schwab,  at 
the  age  of  thirty-four,  was  made  President  of  the 
Carnegie  corporation.  Only  sixteen  years  before 
he  had  entered  the  steel  works  as  a  stake  driver 
at  a  dollar  a  day. 

When  the  Carnegie  group  began  operations  in 
the  early  seventies,  American  steel,  as  a  British 
writer  remarked,  was  a  "hot-house  product";  yet 
in  1900  the  Carnegie  partners  divided  $40,000,000 
as  the  profits  of  a  single  year.  They  had  demon 
strated  that  the  United  States,  despite  the  high 
prices  that  prevailed  everywhere,  could  make  steel 
more  cheaply  than  any  other  country.  Foreign  ob 
servers  have  offered  several  explanations  for  this 
achievement.  American  makers  had  an  endless 
supply  of  cheap  and  high-grade  ore,  cheaper  coke, 
cheaper  transportation,  and  workmen  of  a  superior 


74  THE  AGE  OF  BIG  BUSINESS 

skill.  We  must  give  due  consideration  to  the  fact 
that  their  organization  was  more  flexible  than  those 
of  older  countries,  and  that  it  regulated  promotion 
exclusively  by  merit  and  gave  exceptional  oppor 
tunities  to  young  men.  American  steel  makers  also 
had  scrap  heaps  whose  size  astounded  the  foreign 
observers;  they  never  hesitated  to  discard  the  most 
expensive  plants  if  by  so  doing  they  could  reduce 
the  cost  of  steel  rails  by  a  dollar  a  ton.  Machinery 
for  steel  making  had  a  more  extensive  development 
in  this  country  than  in  England  or  Germany.  Mr. 
Carnegie  also  enjoyed  the  advantages  of  a  high  pro 
tective  tariff,  though  about  1900  he  discovered  that 
his  extremely  healthy  infant  no  longer  demanded 
this  form  of  coddling.  But  probably  the  Carnegie 
Company's  greatest  achievement  was  the  abolition 
of  the  middleman.  In  a  few  years  it  assembled  all 
the  essential  elements  of  steel  making  in  its  own 
hands.  Frick's  entrance  into  the  combination  gave 
the  concern  an  unlimited  supply  of  the  highest 
grade  of  coking  coal.  In  a  few  years,  the  Carnegie 
interests  had  acquired  great  holdings  in  the  Minne 
sota  ore  regions. 

At  first  glance,  the  Pittsburgh  region  seems 
hardly  the  ideal  place  for  the  making  of  steel.  For 
tune  first  placed  the  industry  there  because  all  the 


THE  EPIC  OF  STEEL  75 

raw  materials,  especially  iron  ore  and  coal,  seemed 
to  exist  in  abundance.  But  the  discovery  of  the 
Minnesota  ore  field,  which  alone  could  supply  this 
essential  product  in  the  amounts  which  the  fur 
naces  demanded,  immediately  deprived  the  Pitts 
burgh  region  of  its  chief  advantage.  As  a  result 
of  this  sudden  development,  the  manufacturers  of 
Pittsburgh  awoke  one  morning  and  discovered  that 
their  ore  was  located  a  thousand  miles  away.  To 
bring  it  to  their  converters  necessitated  a  long 
voyage  by  water  and  rail,  with  several  reloadings. 
They  overcame  these  obstacles  by  developing  ma 
chinery  for  handling  ore  and  by  acquiring  the  raw 
materials  and  the  connecting  links  of  transporta 
tion.  Ore  which  had  been  lying  in  the  wilds  of 
Minnesota  on  Monday  morning  was  thus  brought 
to  Pittsburgh  and  made  into  steel  rails  or  bridges 
or  structural  shapes  by  Saturday  night.  The  Car 
negie  Company  first  acquired  sufficient  mineral 
lands  to  furnish  ore  for  several  generations  and  or 
ganized  an  ore  fleet  which  transported  the  products 
of  the  mines  through  the  lakes  to  ports  on  Lake 
Erie,  particularly  Ashtabula  and  Conneaut.  The 
purchase  of  the  Bessemer  and  Lake  Erie  Railroad, 
which  extended  from  Conneaut  to  Pittsburgh,  made 
this  great  transportation  route  complete.  Besides 


76  THE  AGE  OF  BIG  BUSINESS 

freeing  their  business  from  uncertainty,  this  elimi 
nation  of  middlemen  naturally  produced  great 
economies. 

Probably  Andrew  Carnegie's  shrewdness  in  nam 
ing  his  first  plant  the  J.  Edgar  Thompson  Steel 
Works,  after  the  powerful  President  of  the  Penn 
sylvania  Railroad,  and  in  making  Thompson  and 
his  associate  Scott  partners,  had  much  to  do  with 
his  early  success.  These  two  gentlemen  conferred 
two  priceless  favors  upon  the  struggling  enterprise. 
They  became  large  purchasers  of  steel  rails  and 
their  influence  in  this  direction  extended  far  be 
yond  the  Pennsylvania  Railroad.  What  was  per 
haps  even  more  important,  they  gave  the  Carnegie 
concerns  railroad  rebates.  The  use  of  rebates,  as 
a  method  of  stifling  competition  and  building  up  a 
great  industrial  prosperity,  is  an  offense  which  the 
popular  mind  associates  almost  exclusively  with 
the  Standard  Oil  Company,  yet  the  Carnegie  for 
tune,  as  well  as  that  of  John  D.  Rockefeller,  re 
ceived  an  artificial  stimulation  of  this  kind. 

Though  incomparably  the  greatest  of  the  Amer 
ican  steel  companies,  the  Carnegie  Steel  Company 
by  no  means  monopolized  the  field.  In  forty  years, 
indeed,  an  enormous  steel  area  had  grown  up,  in 
cluding  western  Pennsylvania,  Ohio,  Indiana,  and 


THE  EPIC  OF  STEEL  77 

Illinois,  practically  all  of  it  drawing  its  raw  mate 
rials  from  those  same  teeming  ore  lands  in  the  Lake 
Superior  region.  Johnstown,  Youngstown,  Cleve 
land,  Lorain,  Chicago,  and  Joliet,  became  head 
quarters  of  steel  production  almost  as  important  as 
Pittsburgh  itself.  Two  entirely  new  steel  kingdoms, 
each  with  its  own  natural  reservoirs  of  ore,  grew  up 
in  Colorado  and  Alabama.  The  Colorado  Fuel  and 
Iron  Company,  which  possessed  apparently  inex 
haustible  mineral  lands  in  Colorado,  Wyoming, 
Utah,  New  Mexico,  and  California,  itself  produces 
not  far  from  three  million  tons  a  year,  almost  half 
the  present  production  of  Great  Britain.  The  Ala 
bama  steel  country  has  developed  in  even  more 
spectacular  fashion.  Birmingham,  a  hive  of  south 
ern  industry  placed  almost  as  if  by  magic  in  the  lei 
surely  cotton  lands  of  the  South,  had  no  existence 
in  1870,  when  the  Pittsburgh  prosperity  began. 
In  the  Civil  War,  the  present  site  of  a  city  with 
a  population  of  140,000  was  merely  a  blacksmith 
shop  in  the  fork  of  the  roads.  Yet  this  district  has 
advantages  for  the  manufacture  of  steel  that  have 
no  parallel  elsewhere.  The  steel  companies  which 
are  located  here  do  not  have  to  bring  their  ma 
terials  laboriously  from  a  distance  but  possess,  im 
mediately  at  hand,  apparently  endless  store  of  the 


78  THE  AGE  OF  BIG  BUSINESS 

three  things  needful  for  making  steel  —  iron  ore, 
coal,  and  limestone.  All  these  territories  have  their 
personal  romances  and  their  heroes,  many  of  them 
quite  as  picturesque  as  those  of  the  Pittsburgh 
group. 

It  is  doubtful  indeed  if  American  industry  pre 
sents  any  figure  quite  as  astonishing  and  variegated 
as  that  of  John  W.  Gates,  the  man  who  educated 
farmers  all  over  the  world  to  the  use  of  wire  fencing. 
Half  charlatan,  half  enthusiast,  speculator,  gam 
bler,  a  man  who  created  great  enterprises  and  who 
also  destroyed  them,  at  times  an  up-building  force 
and  at  other  times  a  sinister  influence,  Gates  com 
pletely  typified  a  period  in  American  history  that, 
along  with  much  that  was  heroic  and  splendid,  had 
much  also  that  was  grotesque  and  sordid.  The 
opera-bouffe  performance  that  laid  the  foundations 
of  Gates's  great  industry  was  in  every  way  charac 
teristic  of  this  period.  In  1871  Gates,  then  a  clerk 
in  a  hardware  store  at  twenty-five  dollars  a  week, 
made  his  first  attempt  to  sell  barbed  wire  in  the 
great  cattle  countries  of  the  southwestern  States. 
When  the  cattle  men  in  Texas  first  saw  this  barbed 
wire,  they  ridiculed  the  idea  that  it  could  ever  hold 
their  steers .  Gates  selected  a  plaza  in  San  Antonio, 
fenced  it  in  with  his  new  product,  and  invited  the 


THE  EPIC  OF  STEEL  79 

enemies  to  bring  along  their  wildest  specimens. 
About  thirty  of  Texas'  most  ferocious  cattle,  placed 
within  the  enclosure,  spent  a  whole  afternoon 
plunging  at  the  barbs  in  a  useless  and  tormenting 
attempt  to  escape.  This  spectacular  demonstra 
tion  of  efficiency  launched  Gates  fairly  upon  his 
career.  He  immediately  began  to  sell  his  new  fenc 
ing  on  an  enormous  scale;  in  a  few  years  the  whole 
world  was  demanding  it,  and  it  has  become,  as  re 
cent  events  have  disclosed,  a  particularly  formid 
able  munition  of  war.  The  American  Steel  and 
Wire  Company,  one  of  the  greatest  of  American 
corporations,  was  the  ultimate  outgrowth  of  that 
lively  afternoon  in  San  Antonio. 

In  1900  the  Carnegie  Steel  Company  was  making 
one-quarter  of  all  the  Bessemer  steel  produced  in 
the  United  States.  It  owned  in  abundance  all  the 
properties  which  were  essential  to  its  completed 
output  —  coal,  limestone,  steel  ships,  railroads,  and 
steel  mills.  In  twenty-five  years,  from  1875  to 
1900,  this  manufacturing  enterprise  had  paid  the 
Carnegie  group  profits  aggregating  $133,000,000, 
profits  which,  in  the  closing  years  of  the  century, 
had  increased  at  a  stupendous  rate.  In  1898  Car 
negie  and  his  associates  had  divided  $11,500,000, 
in  1899  their  earnings  had  grown  to  $25,000,000,  and 


80  THE  AGE  OF  BIG  BUSINESS 

in  1900  the  aggregate  had  suddenly  jumped  to  $40,- 
000,000.  Of  this  latter  sum  Carnegie  received  $25,- 
000,000,  Phipps  $5,500,000,  Frick  $2,600,000,  and 
Schwab  $1,300,000.  And  Carnegie's  little  group 
could  see  no  limit  to  the  growth  of  their  business 
and  the  expansion  of  their  personal  fortunes.  Yet 
at  that  very  moment  Carnegie  was  planning  to 
play  the  part  of  a  Charles  V.  with  the  large  em 
pire  which  he  had  pieced  together — to  abdicate 
his  throne,  retire  from  business  life,  and  spend  his 
remaining  days  in  quiet. 

Many  influences  were  impelling  him  to  this  de 
cision.  His  triumph,  stupendous  as  it  had  been, 
also  had  had  its  alloy  of  sorrow.  Indeed  this  little 
Scotsman,  now  at  the  crowning  of  his  glory,  was 
one  of  the  loneliest  figures  in  the  world.  Practi 
cally  all  the  forty  men  with  whom  he  had  been 
closely  associated  had  vanished  from  the  scene. 
He  had  quarreled  with  his  playmate  and  lifelong 
partner,  Henry  Phipps,  and  was  in  the  worst  pos 
sible  business  and  personal  relations  with  Frick. 
He  had  no  son  to  carry  on  his  work.  He  had  be 
come  greatly  interested  in  his  philanthropies,  and 
he  had  declared  that  the  man  who  died  rich  died 
disgraced.  Moreover,  new  influences  were  rising 
in  the  steel  trade  with  which  Carnegie  had  little 


THE  EPIC  OF  STEEL  81 

sympathy.  Its  national  capital  seemed  to  be  shift 
ing  from  Pittsburgh  to  Wall  Street.  New  men  who 
knew  nothing  about  steel  but  who  possessed  an 
intimate  acquaintance  with  stocks  and  bonds  — 
J.  Pierpont  Morgan,  George  W.  Perkins,  and  their 
associates  —  were  branching  out  as  controllers  of 
large  steel  interests.  Carnegie  had  no  interest  in 
Wall  Street;  he  has  declared  that  he  never  specu 
lated  in  his  life  and  that  he  would  immediately 
dissociate  himself  from  any  partner  who  would  do 
so.  This  Wall  Street  coterie,  in  the  years  from 
1898  to  1900,  had  made  several  large  combina 
tions  in  the  steel  trade.  That  was  the  era  when  the 
trust  mania  had  gained  possession  of  the  American 
mind  and  when  its  worst  features  displayed  them 
selves.  The  Federal  Steel  Company,  the  American 
Bridge  Company,  the  American  Steel  and  Wire,  the 
National  Tube  Company,  all  representing  the  as 
sembling  of  large  works  which  had  been  engaged 
as  rivals  hi  similar  enterprises,  were  launched, 
with  the  usual  accompaniments  of  "underwriting 
syndicates, "  watered  stock,  and  Wall  Street  spec 
ulation.  This  sort  of  thing  made  no  appeal  to  An 
drew  Carnegie.  His  huge  enterprise  had  always 
remained  essentially  a  copartnership,  and  he  had 
frequently  expressed  his  abhorrence  of  trusts. 


82  THE  AGE  OF  BIG  BUSINESS 

Yet,  in  spite  of  his  wish  to  retire  from  business 
and  in  spite  of  his  avowed  intention  to  die  poor, 
Carnegie  now  adopted  the  policy  of  the  Sibylline 
leaves  to  all  prospective  purchasers.  Moore  and 
Reid  would  have  purchased  his  interest  for  $157,- 
000,000;  when  Rockefeller  came  along  the  price  had 
risen  to  $250,000,000;  when  the  oil  man  shook  his 
head  and  retired,  Carnegie  immediately  raised  his 
price  to  $500,000,000.  It  is  doubtful  whether  he 
would  have  sold  at  all  had  not  his  Wall  Street  com 
petitors  begun  to  encroach  on  a  field  which  the  little 
Scotsman  understood  quite  as  well  as  they  —  the 
production  and  merchandising  of  steel.  The  newly 
organized  combinations  were  completing  elaborate 
plans  to  go  after  Carnegie's  business.  Then  Car 
negie,  who  had  practically  retired  from  active  life, 
again  arrayed  himself  in  his  shirt-sleeves,  aban 
doned  his  career  of  authorship,  and  resumed  his 
early  trade.  His  first  attacks  produced  an  immense 
reverberation  in  the  House  of  Morgan.  He  pur 
chased  a  huge  tract  at  Conneaut  and  began  build 
ing  a  gigantic  plant  for  the  manufacture  of  steel 
tubes,  a  business  in  which  he  had  not  hitherto 
engaged.  This  was  a  blow  aimed  at  one  of  Mor 
gan's  pet  new  creations,  the  National  Tube  Com 
pany.  Should  Carnegie  finish  his  works,  there 


THE  EPIC  OF  STEEL  83 

was  no  doubt  the  Morgan  enterprise  would  be 
ruined,  for  the  new  plant  would  be  far  more  modern 
and  so  could  manufacture  the  product  at  a  much 
lower  price;  and,  with  Charles  M.  Schwab  as  active 
manager,  what  possible  chance  would  the  older  cor 
poration  have?  But  Carnegie  struck  his  enemy  at 
an  even  more  vulnerable  point.  The  Pennsylvania 
Railroad  had  a  practical  monopoly  of  traffic  in  and 
out  of  Pittsburgh,  and  Pittsburgh  "created"  more 
freight  business  than  any  other  city  in  the  world. 
Carnegie  lent  his  powerful  support  to  George  J. 
Gould,  who  was  then  extending  his  railroad  system 
into  the  preempted  field  and  was  also  making 
surveys  and  had  financed  a  company  to  build  an 
entirely  new  railroad  from  Pittsburgh  to  the  At 
lantic  Coast.  As  Carnegie  himself  controlled  the 
larger  part  of  the  freight  that  made  Pittsburgh  such 
an  essential  feeder  to  railroads,  his  new  enterprise 
caused  the  greatest  alarm.  At  the  same  time  Car 
negie  equipped  a  new  and  splendid  fleet  of  ore 
ships,  his  purpose  being  to  enter  a  field  of  transpor 
tation  which  John  D.  Rockefeller  had  found  ex 
tremely  profitable. 

Such  were  the  circumstances  and  such  were  the 
motives  that  gave  birth  to  the  world's  largest  cor 
poration.  All  one  night,  so  the  story  goes,  Charles 


84  THE  AGE  OF  BIG  BUSINESS 

M.  Schwab  and  John  W.  Gates  discussed  the  steel 
situation  with  J.  Pierpont  Morgan.  There  was 
only  one  possible  solution,  they  said  —  Andrew 
Carnegie  must  be  bought  out.  By  the  time  the 
morning  sun  came  through  the  windows  Morgan 
had  been  convinced.  "Go  and  ask  him  what  he 
will  sell  for, "  he  said  to  Schwab.  In  a  brief  period 
Schwab  came  back  to  Morgan  with  a  letter  which 
contained  the  following  figures  —  five  per  cent  gold 
bonds  $303,450,000;  preferred  stock  $98,277,100; 
common  stock  $90,279,000  —  a  total  of  over  $492,- 
000,000.  Carnegie  demanded  no  cash ;  he  preferred 
to  hold  a  huge  first  mortgage  on  a  business  whose 
golden  opportunities  he  knew  so  well.  Morgan, 
who  had  been  accustomed  all  his  life  to  dictate  to 
other  men,  had  now  met  a  man  who  was  able  to 
dictate  to  him.  And  he  capitulated.  The  man 
who  fifty-three  years  before  had  started  life  in  a 
new  country  as  a  bobbin-boy  at  a  dollar  and  twenty 
cents  a  week,  now  at  the  age  of  sixty-six  retired 
from  business  the  second  richest  man  in  the  world. 
With  him  retired  a  miscellaneous  assortment  of 
millionaires  whose  fortunes  he  had  made  and  whose 
subsequent  careers  in  the  United  States  and  in 
Europe  have  given  a  peculiar  significance  to  the 
name  "Pittsburgh  Millionaires."  The  United 


THE  EPIC  OF  STEEL  85 

States  Steel  Corporation,  the  combination  that  in 
cluded  not  only  the  Carnegie  Company  but  seventy 
per  cent  of  all  the  steel  concerns  in  the  country, 
was  really  a  trust  made  up  of  trusts.  It  had  a 
capitalization  of  a  billion  and  a  half,  of  which 
about  $700,000,000  was  composed  of  the  commodity 
usually  known  as  "water";  but  so  greatly  has  its 
business  grown  and  so  capably  has  it  been  managed 
that  all  this  liquid  material  has  since  been  con 
verted  into  more  solid  substance.  The  disappear 
ance  of  Andrew  Carnegie  and  his  coworkers  and 
the  emergence  of  this  gigantic  enterprise  completed 
the  great  business  cycle  in  the  steel  trade.  The 
age  of  individual  enterprise  and  competition  had 
passed  —  that  of  corporate  control  had  arrived. 


CHAPTER  IV 

THE    TELEPHONE:    "AMERICA'S    MOST    POETICAL, 
ACHIEVEMENT" 

A  DISTINGUISHED  English  journalist,  who  was  vis 
iting  the  United  States,  in  1917,  on  an  important 
governmental  mission,  had  an  almost  sublime  il 
lustration  of  the  extent  to  which  the  telephone  had 
developed  on  the  North  American  Continent.  Sit 
ting  at  a  desk  in  a  large  office  building  in  New  York, 
Lord  Northcliffe  took  up  two  telephone  receivers 
and  placed  one  at  each  ear.  In  the  first  he  heard 
the  surf  beating  at  Coney  Island,  New  York,  and 
in  the  other  he  heard,  with  equal  distinctness, 
the  breakers  pounding  the  beach  at  the  Golden 
Gate,  San  Francisco.  Certainly  this  demonstration 
justified  the  statement  made  a  few  years  before 
by  another  English  traveler.  "What  startles  and 
frightens  the  backward  European  in  the  United 
States,"  said  Mr.  Arnold  Bennett,  "is  the  effi 
ciency  and  fearful  universality  of  the  telephone. 

86 


THE  TELEPHONE  87 

To  me  it  was  the  proudest  achievement  and 
the  most  poetical  achievement  of  the  American 
people. " 

Lord  Northcliffe's  experience  had  a  certain 
dramatic  justice  which  probably  even  he  did  not 
appreciate.  He  is  the  proprietor  of  the  London 
Times,  a  newspaper  which,  when  the  telephone  was 
first  introduced,  denounced  it  as  the  "latest  Amer 
ican  humbug"  and  declared  that  it  "was  far  in 
ferior  to  the  well-established  system  of  speaking 
tubes. "  The  London  Times  delivered  this  solemn 
judgment  in  1877.  A  year  before,  at  the  Phila 
delphia  Centennial  Exposition,  Don  Pedro,  Em 
peror  of  Brazil,  picked  up,  almost  accidentally,  a 
queer  cone-shaped  instrument  and  put  it  to  his  ear. 
"My  God!  It  talks!"  was  his  exclamation;  an 
incident  which,  when  widely  published  in  the  press, 
first  informed  the  American  people  that  another 
of  the  greatest  inventions  of  all  times  had  had  its 
birth  on  their  own  soil.  Yet  the  initial  judgment 
of  the  American  people  did  not  differ  essentially 
from  the  opinion  which  had  been  more  coarsely 
expressed  by  the  leading  English  newspaper.  Our 
fathers  did  not  denounce  the  telephone  as  an 
"American  humbug,"  but  they  did  describe  it  as  a 
curious  electric  "toy  "  and  ridiculed  the  notion  that 


88  THE  AGE  OP  BIG  BUSINESS 

it  could  ever  have  any  practical  value.  Even  after 
Alexander  Graham  Bell  and  his  associates  had  com 
pletely  demonstrated  its  usefulness,  the  Western 
Union  Telegraph  Company  refused  to  purchase  all 
their  patent  rights  for  $100,000 !  Only  forty  years 
have  passed  since  the  telephone  made  such  an  in 
auspicious  beginning.  It  remains  now,  as  it  was 
then,  essentially  an  American  achievement.  Other 
nations  have  their  telephone  systems,  but  it  is  only 
in  the  United  States  that  its  possibilities  have  been 
even  faintly  realized.  It  is  not  until  Americans 
visit  foreign  countries  that  they  understand  that, 
imperfect  as  in  certain  directions  their  industrial 
and  social  organization  may  be,  in  this  respect  at 
least  their  nation  is  preeminent. 

The  United  States  contains  nearly  all  the  tele 
phones  in  existence,  to  be  exact,  about  seventy-five 
per  cent.  We  have  about  ten  million  telephones, 
while  Canada,  Central  America,  South  America, 
Great  Britain,  Europe,  Asia,  and  Africa  all  com 
bined  have  only  about  four  million.  In  order  to 
make  an  impressive  showing,  however,  we  need  not 
include  the  backward  peoples,  for  a  comparison 
with  the  most  enlightened  nations  emphasizes  the 
same  point.  Thus  New  York  City  has  more  tele 
phones  than  six  European  countries  taken  together 


THE  TELEPHONE  89 

—  Austria-Hungary,  Belgium,  Norway,  Denmark, 
Italy,  and  the  Netherlands.    Chicago,  with  a  pop 
ulation  of  2,000,000,  has  more  telephones  than 
the  whole  of  France,  with  a  population  of  40,000,- 
000.    Philadelphia,  with  1,500,000,  has  more  than 
the  Russian  Empire,  with  166,000,000.  Boston  has 
more  telephones  than  Austria-Hungary,  Los  An 
geles  more  than  the  Netherlands,  and  Kansas  City 
more  than  Belgium.     Several  office  buildings  and 
hotels  in  New  York  City  have  more  instruments 
than  the  kingdoms  of  Greece  or  Bulgaria.    The 
whole  of  Great  Britain  and  Ireland  has  about 
650,000  telephones,  which  is  only  about  200,000 
more  than  the  city  of  New  York. 

Mere  numbers,  however,  tell  only  half  the  story. 
It  is  when  we  compare  service  that  American 
superiority  stands  most  manifest.  The  London 
newspapers  are  constantly  filled  with  letters  abus 
ing  the  English  telephone  system.  If  these  com 
munications  describe  things  accurately,  there  is 
apparently  no  telephone  vexation  that  the  Eng 
lishman  does  not  have  to  endure.  Delays  in 
getting  connections  are  apparently  chronic.  At 
times  it  seems  impossible  to  get  connections  at 
all,  especially  from  four  to  five  in  the  afternoon 

—  when  the  operators  are  taking  tea.    Suburban 


90  THE  AGE  OF  BIG  BUSINESS 

connections,  which  in  New  York  take  about  ninety 
seconds,  average  hah*  an  hour  in  London,  and  many 
of  the  smaller  cities  have  no  night  service.  An 
American  thinks  nothing  of  putting  in  a  telephone; 
he  notifies  his  company  and  in  a  few  days  the  in 
strument  is  installed.  We  take  a  thing  like  this 
for  granted.  But  there  are  places  where  a  mere 
telephone  subscription,  the  privilege  of  having  an 
instrument  installed,  is  a  property  right  of  con 
siderable  value  and  where  the  telephone  service 
has  a  "waiting  list,"  like  an  exclusive  club.  In 
Japan  one  can  sell  a  telephone  privilege  at  a  good 
price,  its  value  being  daily  quoted  on  the  Stock 
Exchange.  Americans,  by  constantly  using  the 
telephone,  have  developed  what  may  be  called  a 
sixth  sense,  which  enables  them  to  project  their 
personalities  over  an  almost  unlimited  area.  In 
the  United  States  the  telephone  has  become  the  one 
all-prevailing  method  of  communication.  The 
European  writes  or  telegraphs  while  the  American 
more  frequently  telephones.  In  this  country  the 
telephone  penetrates  to  places  which  even  the  mails 
never  reach.  The  rural  free  delivery  and  other 
forms  of  the  mail  service  extend  to  58,000  com 
munities,  while  our  10,000,000  telephones  encom 
pass  70,000.  We  use  this  instrument  for  all  the 


THE  TELEPHONE  91 

varied  experiences  of  life,  domestic,  social,  and 
commercial.  There  are  residences  in  New  York 
City  that  have  private  branch  exchanges,  like  a 
bank  or  a  newspaper  office.  Hostesses  are  more  and 
more  falling  into  the  habit  of  telephoning  invita 
tions  for  dinner  and  other  diversions.  Many  people 
find  telephone  conversations  more  convenient  than 
personal  interviews,  and  it  is  every  day  displacing 
the  stenographer  and  the  traveling  salesman. 

Perhaps  the  most  noteworthy  achievement  of  the 
telephone  is  its  transformation  of  country  life.  In 
Europe,  rural  telephones  are  almost  unknown, 
while  in  the  United  States  one-third  of  all  our  tele 
phone  stations  are  in  country  districts.  The  farmer 
no  longer  depends  upon  the  mails;  like  the  city 
man,  he  telephones.  This  instrument  is  thus  the 
greatest  civilizing  force  we  have,  for  civilization 
is  very  largely  a  matter  of  intercommunication. 
Indeed,  the  telephone  and  other  similar  agencies, 
such  as  the  parcel  post,  the  rural  free  delivery, 
better  roads,  and  the  automobile,  are  rapidly  trans 
forming  rural  life  in  this  country.  In  several  re 
gions,  especially  in  the  Mississippi  Valley,  a  farmer 
who  has  no  telephone  is  in  a  class  by  himself, 
like  one  who  has  no  mowing-machine.  Thus  the 
latest  returns  from  Iowa,  taken  by  the  census  as 


92  THE  AGE  OF  BIG  BUSINESS 

far  back  as  1907,  showed  that  seventy-three  per 
cent  of  all  the  farms  —  160,000  out  of  220,000  — 
had  telephones  and  the  proportion  is  unquestion 
ably  greater  now.  Every  other  farmhouse  from 
the  Atlantic  to  the  Pacific  contains  at  least  one 
instrument.  These  statistics  clearly  show  that  the 
telephone  has  removed  half  the  terrors  and  isola 
tion  of  rural  life.  Many  a  lonely  farmer's  wife  or 
daughter,  on  the  approach  of  a  suspicious-looking 
character,  has  rushed  to  the  telephone  and  called 
up  the  neighbors,  so  that  now  tramps  notoriously 
avoid  houses  that  shelter  the  protecting  wires.  In 
remote  sections,  insanity,  especially  among  women, 
is  frequently  the  result  of  loneliness,  a  calamity 
which  the  telephone  is  doing  much  to  mitigate. 

In  the  United  States  today  there  is  one  telephone 
to  every  nine  persons.  This  achievement  repre 
sents  American  invention,  genius,  industrial  organ 
ization,  and  business  enterprise  at  their  best.  The 
story  of  American  business  contains  many  chap 
ters  and  episodes  which  Americans  would  willingly 
forget.  But  the  American  Telephone  and  Tele 
graph  Company  represents  an  industry  which  has 
made  not  a  single  "swollen  fortune, "  whose  largest 
stockholder  is  the  wife  of  Alexander  Graham  Bell, 
the  inventor  (a  woman  who,  being  totally  deaf, 


THE  TELEPHONE  93 

has  never  talked  over  the  telephone);  which  has 
not  corrupted  legislatures  or  courts;  which  has 
steadily  decreased  the  prices  of  its  products  as 
business  and  profits  have  increased;  which  has 
never  issued  watered  stock  or  declared  fictitious 
dividends ;  and  which  has  always  manifested  a  high 
sense  of  responsibility  in  its  dealings  with  the 
public. 

Two  forces,  American  science  and  American 
business  capacity,  have  accomplished  this  result. 
As  a  mechanism,  this  American  telephone  system 
is  the  product  not  of  one  but  of  many  minds.  What 
most  strikes  the  imagination  is  the  story  of  Alex 
ander  Graham  Bell,  yet  other  names  —  Carty, 
Scribner,  Pupin  —  play  a  large  part  in  the  story. 

The  man  who  discovered  that  an  electric  current 
had  the  power  of  transmitting  sound  over  a  copper 
wire  knew  very  little  about  electricity.  Had  he 
known  more  about  this  agency  and  less  about 
acoustics,  Bell  once  said  himself,  he  would  never 
have  invented  the  telephone.  His  father  and 
grandfather  had  been  teachers  of  the  deaf  and 
dumb  and  had  made  important  researches  in  acous 
tics.  Alexander  Graham  Bell,  born  in  Edinburgh 
in  March,  1847,  and  educated  there  and  in  London, 
followed  the  ancestral  example.  This  experience 


94  THE  AGE  OF  BIG  BUSINESS 

gave  Bell  an  expert  knowledge  of  phonetics  that 
laid  the  foundation  for  his  life  work.  His  inven 
tion,  indeed,  is  clearly  associated  with  his  attempts 
to  make  the  deaf  and  dumb  talk.  He  was  driven 
to  America  by  ill-health,  coming  first  to  Canada, 
and  in  1871  he  settled  in  Boston,  where  he  accepted 
a  position  in  Boston  University  to  introduce  his 
system  of  teaching  deaf-mutes.  He  opened  a 
school  of  "Vocal  Physiology,"  and  his  success  in 
his  chosen  field  brought  him  into  association  with 
the  people  who  afterward  played  an  important  part 
in  the  development  of  the  telephone.  Not  a  single 
element  of  romance  was  lacking  in  Bell's  experi 
ence;  his  great  invention  even  involved  the  love 
story  of  his  life.  Two  influential  citizens  of  Boston, 
Thomas  Sanders  and  Gardiner  G.  Hubbard,  had 
daughters  who  were  deaf  and  dumb,  and  both 
engaged  Bell's  services  as  teacher.  Bell  lived  in 
Sanders's  home  for  a  considerable  period,  dividing 
his  time  between  teaching  his  little  pupil  how  to 
talk  and  puttering  away  at  a  proposed  invention 
which  he  called  a  "harmonic  telegraph."  Both 
Sanders  and  Hubbard  had  become  greatly  inter 
ested  in  this  contrivance  and  backed  Bell  finan 
cially  while  he  worked.  It  was  Bell's  idea  that,  by 
a  system  of  tuning  different  telegraphic  receivers 


ALEXANDER  GRAHAM  BELL 
Photograph  by  Harris  &  Ewing,  Washington. 


THE  AGE  OF  BIG  BUS? 

gave  Bell  an  expert  knowledge  of  phonetics 
laid  the  foundation  for  bis  life  work.    His  in 
lion,  indeed,  is  clearly  associated  with  his  attempts 
to  make  the  deaf  and  dumb  talk.    He  was  driven 
to  America  by  ill-heal  T  ig  first  to  Canada, 

and  in  1871  he  settled  in  Beaton,  where  he  accepted 
a  position  in  Boston  Univ  ..,  introduce  his 

system  of  teaching  deaf-mutes.  He  opened  a 
school  of  "Vocal  Physiology/*  and  his  success  in 
his  chosen  field  brought  him  into  association  with 
the  people  wh^^4te^TSffiL|^a|»dviiiiE4K> rt ;int  part 
in  the  deveiojj^^o^fei^^^^jS^  single 
element  of  romance  was  lacking  in  Bell's  experi 
ence;  his  great  invention  even  involved  the  love 
story  of  his  life.  T>  izens  of  Boston, 

Thomas  Sander*  aad  <  had 

... 

engaged  Bell's  services  «*  tc*cber 
Sanders's  home  for  a  consider: •.  ilng 

his  time  between  teaching  his  pil  how  to 

talk  and  puttering  away  at  a  proposed  invention 
which  he  called  a  "harmonic  telegraph."  Both 
Sanders  and  Hubbard  had  become  greatly  inter 
ested  in  this  contrivance  and  backed  Bell  finan 
cially  while  he  worked.  It  was  Bell's  idea  that,  by 
*  aystem  of  tuning  different  telegraphic  r 


THE  TELEPHONE  95 

to  different  pitches,  several  telegraphic  messages 
could  be  sent  simultaneously  over  the  same  wire. 
The  idea  was  not  original  with  Bell,  although  he 
supposed  that  it  was  and  was  entirely  unaware 
that,  at  the  particular  moment  when  he  started 
work,  about  twenty  other  inventors  were  strug 
gling  with  the  same  problem.  It  was  one  of  these 
other  twenty  experimenters,  Elisha  Gray,  who  ulti 
mately  perfected  this  instrument.  Bell's  researches 
have  an  interest  only  in  that  they  taught  him  much 
about  sound  transmission  and  other  kindred  sub 
jects  and  so  paved  the  way  for  his  great  conception. 
One  day  Hubbard  and  Sanders  learned  that 
Bell  had  abandoned  his  "harmonic  telegraph"  and 
was  experimenting  with  an  entirely  new  idea.  This 
was  the  possibility  of  transmitting  the  human  voice 
over  an  electric  wire.  While  working  in  Sanders's 
basement,  Bell  had  obtained  from  a  doctor  a  dead 
man's  ear,  and  it  is  said  that  while  he  was  minutely 
studying  and  analyzing  this  gruesome  object,  the 
idea  of  the  telephone  first  burst  upon  his  mind. 
For  years  Bell  had  been  engaged  in  a  task  that 
seemed  hopeless  to  most  men  —  that  of  making 
deaf-mutes  talk.  "  If  I  can  make  a  deaf-mute  talk, 
I  can  make  iron  talk,"  he  declared.  "If  I  could 
make  a  current  of  electricity  vary  in  intensity  as 


96  THE  AGE  OF  BIG  BUSINESS 

the  air  varies  in  density, "  he  said  at  another  time, 
"I  could  transmit  sound  telegraphically. "  Many 
others,  of  course,  had  dreamed  of  inventing  such 
an  instrument.  The  story  of  the  telephone  con 
cerns  many  men  who  preceded  Bell,  one  of  whom, 
Philip  Reis,  produced,  in  1861,  a  mechanism  that 
could  send  a  few  discordant  sounds,  though  not  the 
human  voice,  over  an  electric  wire.  Reis  seemed  to 
have  based  his  work  upon  an  article  published  in 
The  American  Journal  of  Science  by  Dr.  C.  G.  Page, 
of  Salem,  Mass.,  in  1837,  in  which  he  called  attention 
to  the  sound  given  out  by  an  electric  magnet  when 
the  circuit  is  opened  or  closed.  The  work  of  these 
experimenters  involves  too  many  technicalities  for 
discussion  in  this  place.  The  important  facts  are 
that  they  all  involved  different  principles  from 
those  worked  out  by  Bell  and  that  none  of  them 
ever  attained  any  practical  importance.  Reis,  in 
particular,  never  grasped  the  essential  principles 
that  ultimately  made  the  telephone  a  reality.  His 
work  occupies  a  place  in  telephone  history  only  be 
cause  certain  financial  interests,  many  years  after 
his  death,  brought  it  to  light  in  an  attempt  to 
discredit  Bell's  claim  to  priority  as  the  inven 
tor.  An  investigator  who  seems  to  have  grasped 
more  clearly  the  basic  idea  was  the  distinguished 


THE  TELEPHONE  97 

American  inventor  Elisha  Gray,  already  mentioned 
as  the  man  who  had  succeeded  in  perfecting  the 
"harmonic  telegraph."  On  February  14,  1876, 
Gray  filed  a  caveat  in  the  United  States  Pat 
ent  Office,  setting  forth  pretty  accurately  the  con 
ception  of  the  electric  telephone.  The  tragedy  in 
Gray's  work  consists  in  the  fact  that,  two  hours 
before  his  caveat  had  been  put  in,  Bell  had  filed 
his  application  for  a  patent  on  the  completed 
instrument. 

The  champions  of  Bell  and  Gray  may  dispute  the 
question  of  priority  to  their  heart's  content;  the 
historic  fact  is  that  the  telephone  dates  from  a 
dramatic  moment  in  the  year  1876.  Sanders  and 
Hubbard,  much  annoyed  that  Bell  had  abandoned 
his  harmonic  telegraph  for  so  visionary  an  idea  as  a 
long  distance  talking  machine,  refused  to  finance 
him  further  unless  he  returned  to  his  original  quest. 
Disappointed  and  disconsolate,  Bell  and  his  assist 
ant,  Thomas  A.  Watson,  had  started  work  on  the 
top  floor  of  the  Williams  Manufacturing  Company's 
shop  in  Boston.  And  now  another  chance  happen 
ing  turned  Bell  back  once  more  to  the  telephone. 
His  magnetized  telegraph  wire  stretched  from  one 
room  to  another  located  in  a  remote  part  of  the 
building.  One  day  Watson  accidentally  plucked  a 


98  THE  AGE  OF  BIG  BUSINESS 

piece  of  clock  wire  that  lay  near  this  telegraph  wire, 
and  Bell,  working  in  another  room,  heard  the  twang. 
A  few  seconds  later  Watson  was  startled  when  an 
excited  and  somewhat  disheveled  figure  burst  into 
his  room.  "What was  that? "shouted Bell.  What 
had  happened  was  clearly  manifest;  a  sound  had 
been  sent  distinctly  over  an  electric  wire.  Bell's 
harmonic  telegraph  immediately  went  into  the  dis 
card,  and  the  young  inventor  —  Bell  was  then  only 
twenty-nine  —  became  a  man  of  one  passionate 
idea.  Yet  final  success  did  not  come  easily;  the 
inventor  worked  day  and  night  for  forty  weeks 
before  he  had  obtained  satisfactory  results.  It 
was  on  March  10, 1876,  that  Watson,  in  a  distant 
room,  picked  up  the  first  telephone  receiver  and 
heard  these  words,  the  first  that  had  ever  passed 
over  a  magnetized  wire,  "Come  here,  Watson;  I 
want  you. "  The  speaking  instrument  had  become 
a  reality,  and  the  foundation  of  the  telephone,  in 
all  its  present  development,  had  been  laid.  When 
the  New  York  and  San  Francisco  line  was  opened 
in  January,  1915,  Alexander  Graham  Bell  spoke 
these  same  words  to  his  old  associate,  Thomas  Wat 
son,  located  in  San  Francisco,  both  men  using  the 
same  instruments  that  had  served  so  well  on  that 
historic  occasion  forty  years  before. 


THE  TELEPHONE  99 

Though  Bell's  first  invention  comprehended  the 
great  basic  idea  that  made  it  a  success,  the  instru 
ment  itself  bore  few  external  resemblances  to  that 
which  has  become  so  commonplace  today.  If  one 
could  transport  himself  back  to  this  early  period 
and  undergo  the  torture  of  using  this  primitive 
telephone,  he  would  appreciate  somewhat  the  labor, 
the  patience,  the  inventive  skill,  and  the  business 
organization  that  have  produced  the  modern  tele 
phone.  In  the  first  place  you  would  have  no  sepa 
rate  transmitter  and  receiver.  You  would  talk 
into  a  funnel-shaped  contrivance  and  then  place 
it  against  your  ear  to  get  the  returning  message. 
In  order  to  make  yourself  heard,  you  would  have  to 
shout  like  a  Gloucester  sea-captain  at  the  height 
of  a  storm.  More  than  the  speakers'  voices  would 
come  over  the  wire.  It  seemed  to  have  become  the 
playground  of  a  million  devils;  moanings,  shriek- 
ings,  mutterings,  and  noises  of  all  kinds  would 
constantly  interrupt  the  flow  of  speech.  To  call 
up  your  "party"  you  would  not  merely  lift  the 
receiver  as  today;  you  would  tap  with  a  lead 
pencil,  or  some  other  appliance,  upon  the  dia 
phragm  of  your  transmitter.  There  were  no  sepa 
rate  telephone  wires.  The  talking  at  first  was  done 
over  the  telegraph  lines.  The  earliest  "centrals" 


100  THE  AGE  OF  BIG  BUSINESS 

reminded  most  persons  of  madhouses,  for  the  day 
of  the  polite,  soft-spoken  telephone  girl  had  not  ar 
rived.  Instead,  boys  were  rushing  around  with  the 
ends  of  wires  which  they  were  frantically  attempt 
ing  to  peg  into  the  holes  of  the  primitive  switch 
board  and  so  establish  "connections. "  When  not 
knocking  down  and  fighting  each  other,  these  boys 
were  swearing  into  transmitters  at  the  customers; 
and  it  is  said  that  the  incurable  profanity  of  these 
early  "telephone  boys"  had  much  to  do  with  their 
supersession  by  girls.  In  the  early  days  of  the 
telephone,  each  instrument  had  to  carry  its  own 
battery,  usually  installed  in  a  little  box  under  the 
transmitter.  The  early  telephone  wires,  even  in 
the  largest  cities,  were  strung  on  poles,  as  they  are 
in  country  and  suburban  districts  today.  In  places 
like  New  York  and  Chicago,  these  thousands  of 
overhanging  wires  not  only  destroyed  the  attrac 
tiveness  of  the  thoroughfare,  but  constantly  inter 
fered  with  the  fire  department  and  proved  to  be 
public  nuisances  in  other  ways.  A  telephone  wire, 
however,  loses  much  of  its  transmitting  power  when 
placed  under  ground,  and  it  took  many  years  of  ex 
perimenting  before  the  engineers  perfected  these 
subways.  In  these  early  days,  of  course,  the  tele 
phone  was  purely  a  local  matter.  Certain  visionary 


THE  TELEPHONE  101 

enthusiasts  had  foreseen  the  possibility  of  a  na 
tional,  long  distance  system,  but  a  large  amount 
of  labor,  both  in  the  laboratory  and  out,  was  to  be 
expended  before  these  aspirations  could  become 
realities. 

The  transformation  of  this  rudimentary  means 
of  communication  into  the  beautiful  mechanism 
which  we  have  today  forms  a  splendid  chapter  in 
the  history  of  American  invention.  Of  all  the  de 
tails  in  Bell's  apparatus  the  receiver  is  almost  the 
only  one  that  remains  now  what  it  was  forty  years 
ago.  The  story  of  the  transmitter  in  itself  would 
fill  a  volume.  Edison's  success  in  devising  a  trans 
mitter  which  permitted  talk  in  ordinary  conver 
sational  tones  —  an  invention  that  became  the 
property  of  the  Western  Union  Telegraph  Com 
pany,  which  early  embarked  in  the  telephone  busi 
ness  —  at  one  time  seemed  likely  to  force  the  Bell 
Company  out  of  business.  But  Emile  Berliner  and 
Francis  Blake  finally  came  to  the  rescue  with  an 
excellent  instrument,  and  the  suggestion  of  an 
English  clergyman,  the  Reverend  Henry  Hum- 
mings,  that  carbon  granules  be  used  on  the  dia 
phragm,  made  possible  the  present  perfect  instru 
ment.  The  magneto  call  bell  —  still  used  in  cer 
tain  backward  districts  —  for  many  years  gave  fair 


102  THE  AGE  OF  BIG  BUSINESS 

results  for  calling  purposes,  but  the  automatic 
switch,  which  enables  us  to  get  central  by  merely 
picking  up  the  receiver,  has  made  possible  our  great 
urban  service.  It  was  several  years  before  the 
telephone  makers  developed  so  essential  a  thing  as 
a  satisfactory  wire.  Silver,  which  gave  excellent 
results,  was  obviously  too  costly,  and  copper,  the 
other  metal  which  had  many  desirable  qualities, 
was  too  soft.  Thomas  B.  Doolittle  solved  this 
problem  by  inventing  a  hard-drawn  copper  wire. 
A  young  man  of  twenty-two,  John  J.  Carty, 
suggested  a  simple  device  for  exorcising  the  hun 
dreds  of  "mysterious  noises"  that  had  made  the 
use  of  the  telephone  so  agonizing.  It  was  caused, 
Carty  pointed  out,  by  the  circumstance  that  the 
telephone,  like  the  telegraph,  used  a  ground  circuit 
for  the  return  wire;  the  resultant  scrapings  and 
moanings  and  howlings  were  merely  the  multitu 
dinous  voices  of  mother  earth  herself.  Mr.  Carty 
began  installing  the  metallic  circuit  in  his  lines  — 
that  is,  he  used  wire,  instead  of  the  ground,  to 
complete  the  circuit.  As  a  result  of  this  improve 
ment  the  telephone  was  immediately  cleared  of 
these  annoying  interruptions.  Mr.  Carty,  who  is 
now  Chief  Engineer  of  the  American  Telephone  and 
Telegraph  Company,  and  the  man  who  has  super- 


THE  TELEPHONE  103 

intended  all  its  extensions  in  recent  years,  is  one  of 
the  three  or  four  men  who  have  done  most  to  create 
the  present  system .  Another  is  Charles  E .  Scribner, 
who,  by  his  invention  of  that  intricate  device,  the 
multiple  switchboard,  has  converted  the  telephone 
exchange  into  a  smoothly  working,  orderly  place. 
Scribner's  multiple  switchboard  dates  from  about 
1890.  It  was  Mr.  Scribner  also  who  replaced 
the  individual  system  of  dry  cells  with  one  com 
mon  battery  located  at  the  central  exchange,  an 
improvement  which  saved  the  Company  4,000,- 
000  dry  cells  a  year.  Then  Barrett  discovered  a 
method  of  twisting  fifty  pairs  of  wires  —  since 
grown  to  2400  pairs  —  into  a  cable,  wrapping  them 
in  paper  and  molding  them  in  lead,  and  the  wires 
were  now  taken  from  poles  and  placed  in  conduits 
underground. 

But  perhaps  the  most  romantic  figure  in  tele 
phone  history,  next  to  Bell,  is  that  of  a  humble  Ser 
vian  immigrant  who  came  to  this  country  as  a  boy 
and  obtained  his  first  employment  as  a  rubber  in 
a  Turkish  bath.  Michael  I.  Pupin  was  graduated 
from  Columbia,  studied  afterward  in  Germany,  and 
became  absorbed  in  the  new  subject  of  electro- 
mechanics.  In  particular  he  became  interested  in 
a  telephone  problem  that  had  bothered  the  greatest 


104  THE  AGE  OF  BIG  BUSINESS 

experts  for  years.  One  thing  that  had  prevented 
the  great  extension  of  the  telephone,  especially  for 
long  distance  work,  was  the  size  of  the  wire.  Long 
distance  lines  up  to  1900  demanded  wire  about 
one-eighth  of  an  inch  thick  —  as  thick  as  a  fair- 
sized  lead  pencil;  and,  for  this  reason,  the  New 
York-Chicago  line,  built  hi  1893,  consumed  870,000 
pounds  of  copper  wire  of  this  size.  Naturally  the 
enormous  expense  stood  in  the  way  of  any  extended 
development.  The  same  thickness  also  interfered 
with  cable  extension.  Only  about  a  hundred  wires 
could  be  squeezed  into  one  cable,  against  the  eight 
een  hundred  now  compressed  in  the  same  area. 
Because  of  these  shortcomings,  telephone  progress, 
about  1900,  was  marking  time,  awaiting  the  arrival 
of  a  thin  wire  that  would  do  the  work  of  a  thick  one. 
The  importance  of  the  problem  is  shown  by  the 
fact  that  one-fourth  of  all  the  capital  invested  in 
the  telephone  has  been  spent  in  copper.  Professor 
Pupin,  who  had  been  a  member  of  the  faculty  of 
Columbia  University  since  1888,  solved  this  prob 
lem  in  his  quiet  laboratory  and,  by  doing  so,  won 
the  greatest  prize  in  modern  telephone  art.  His 
researches  resulted  in  the  famous  "Pupin  coil"  by 
the  expedient  now  known  as  "loading."  When 
the  scientists  attempt  to  explain  this  invention, 


THE  TELEPHONE  105 

they  have  to  use  all  kinds  of  mathematical  formulas 
and  curves  and,  in  fact,  they  usually  get  to  quarrel 
ing  among  themselves  over  the  points  involved. 
What  Professor  Pupin  has  apparently  done  is  to 
free  the  wire  from  those  miscellaneous  disturbances 
known  as  "induction."  This  Pupin  invention  in 
volved  another  improvement  unsuspected  by  the 
inventor,  which  shows  us  the  telephone  in  all  its 
mystery  and  beauty  and  even  its  sublimity.  Soon 
after  the  Pupin  coil  was  introduced,  it  was  discov 
ered  that,  by  crossing  the  wires  of  two  circuits  at 
regular  intervals,  another  unexplainable  circuit 
was  induced.  Because  this  third  circuit  travels 
apparently  without  wires,  in  some  manner  which 
the  scientists  have  not  yet  discovered,  it  is  appro 
priately  known  as  the  phantom  circuit.  The  prac 
tical  result  is  that  it  is  now  possible  to  send  three 
telephone  messages  and  eight  telegraph  messages 
over  two  pairs  of  wires  —  all  at  the  same  time. 
Professor  Pupin's  invention  has  resulted  in  econo 
mies  that  amount  to  millions  of  dollars,  and  has 
made  possible  long  distance  lines  to  practically 
every  part  of  the  United  States. 

Thus  many  great  inventive  minds  have  produced 
the  physical  telephone.  We  can  point  to  several 
men  —  Bell,  Blake,  Carty,  Scribner,  Barrett,  Pupin 


106  THE  AGE  OF  BIG  BUSINESS 

—  and  say  of  each  one,  "Without  his  work  the 
present  telephone  system  could  not  exist."  But 
business  genius,  as  well  as  mechanical  genius,  ex 
plains  this  achievement.  For  the  first  four  or  five 
years  of  its  existence,  the  new  invention  had  hard 
sailing.  Bell  and  Thomas  Watson,  in  order  to  for 
tify  their  finances,  were  forced  to  travel  around 
the  country,  giving  a  kind  of  vaudeville  entertain 
ment.  Bell  made  a  speech  explaining  the  new  in 
vention,  while  a  cornet  player,  located  in  another 
part  of  the  town,  played  solos,  the  music  reach 
ing  the  audience  through  several  telephone  in 
struments  placed  against  the  walls.  Watson,  also 
located  at  a  distance,  varied  the  program  by  sing 
ing  songs  via  telephone.  These  lecture  tours  not 
only  gave  Bell  the  money  which  he  sorely  needed 
but  advertised  the  innovation.  There  followed  a 
few  scattering  attempts  to  introduce  the  telephone 
into  every-day  use  and  telephone  exchanges  were 
established  in  New  York,  Boston,  Bridgeport,  and 
New  Haven.  But  these  pioneers  had  the  hostility 
of  the  most  powerful  corporation  of  the  day  —  the 
Western  Union  Telegraph  Company  —  and  they 
lacked  aggressive  leaders. 

In  1878,  Mr.  Gardiner  Hubbard,  Bell's  earli 
est  backer,  and  now  his  father-in-law,  became 


THE  TELEPHONE  107 

acquainted  with  a  young  man  who  was  then  serv 
ing  in  Washington  as  General  Superintendent  of 
the  Railway  Mail  Service.  This  young  man  was 
Theodore  N.  Vail.  His  energy  and  enterprise  so 
impressed  Hubbard  that  he  immediately  asked 
Vail  to  become  General  Manager  of  the  company 
which  he  was  then  forming  to  exploit  the  telephone. 
Viewed  from  the  retrospection  of  forty  years  this 
offer  certainly  looks  like  one  of  the  greatest  prizes 
in  American  business.  What  it  signified  at  that 
time,  however,  is  apparent  from  the  fact  that  the 
office  paid  a  salary  of  $3500  a  year  and  that  for  the 
first  ten  years  Vail  did  not  succeed  in  collecting  a 
dollar  of  this  princely  remuneration.  Yet  it  was  a 
happy  fortune,  not  only  for  the  Bell  Company  but 
for  the  nation,  that  placed  Vail  at  the  head  of  this 
struggling  enterprise.  There  was  a  certain  appro 
priateness  in  his  selection,  even  then.  His  grand- 
uncle,  Stephen  Vail,  had  built  the  engines  for  the 
first  steamship  to  cross  the  Atlantic.  A  cousin  had 
worked  with  Morse  while  he  was  inventing  the  tele 
graph.  Vail,  who  was  born  in  Carroll  County,  Ohio, 
in  1845,  after  spending  two  years  as  a  medical  stu 
dent,  suddenly  shifted  his  plans  and  became  a  tele 
graph  operator.  Then  he  entered  the  Railway  Mail 
service;  in  this  service  he  completely  revolutionized 


108  THE  AGE  OF  BIG  BUSINESS 

the  system  and  introduced  reforms  that  exist  at 
the  present  time.  A  natural  bent  had  apparently 
directed  Vail's  mind  towards  methods  of  com 
munication,  a  fact  that  may  perhaps  explain  the 
youthful  enthusiasm  with  which  he  took  up  the 
new  venture  and  the  vision  with  which  he  foresaw 
and  planned  its  future.  For  the  chief  fact  about 
Vail  is  that  he  was  a  business  man  with  an  imagi 
nation.  The  crazy  little  machine  which  he  now 
undertook  to  exploit  did  not  interest  him  as  a 
means  of  collecting  tolls,  floating  stock,  and  paying 
dividends.  He  saw  in  it  a  new  method  of  spread 
ing  American  civilization  and  of  contributing  to 
the  happiness  and  comfort  of  millions  of  people. 
Indeed  Vail  had  hardly  seen  the  telephone  when  a 
picture  portraying  the  development  which  we  are 
familiar  with  today  unfolded  before  his  eyes.  That 
the  telephone  has  had  a  greater  development  in 
America  than  elsewhere  and  that  the  United  States 
has  avoided  all  those  mistakes  of  organization  that 
have  so  greatly  hampered  its  growth  in  other  lands, 
is  owing  to  the  fact  that  Vail,  when  he  first  took 
charge,  mapped  out  the  comprehensive  policies 
which  have  guided  his  corporation  since. 

Vail  early  adopted  the  "slogan"  which  has  di 
rected  the  Bell  activities  for  forty  years — "One 


THE  TELEPHONE  109 

System!  One  Policy!  Universal  Service. "  In  his 
mind  a  telephone  company  was  not  a  city  affair, 
or  even  a  state  affair;  it  was  a  national  affair.  His 
aim  has  been  from  the  first  a  universal,  national 
service,  all  under  one  head,  and  reaching  every 
hamlet,  every  business  house,  factory,  and  home 
in  the  nation.  The  idea  that  any  man,  anywhere, 
should  be  able  to  take  down  a  receiver  and  talk  to 
anyone,  anywhere  else  in  the  United  States,  was  the 
conception  which  guided  Vail's  labors  from  the  first. 
He  did  not  believe  that  a  mass  of  unrelated  com 
panies  could  give  a  satisfactory  service;  if  circum 
stances  had  ever  made  a  national  monopoly,  that 
monopoly  was  certainly  the  telephone.  Having  in 
view  this  national,  universal,  articulating  monop 
oly,  Vail  insisted  on  his  second  great  principle, 
the  standardization  of  equipment.  Every  man's 
telephone  must  be  precisely  like  every  other  man's, 
and  that  must  be  the  best  which  mechanical  skill 
and  inventive  genius  could  produce.  To  make  this 
a  reality  and  to  secure  perfect  supervision  and  up 
keep,  it  was  necessary  that  telephones  should  not 
be  sold  but  leased.  By  enforcing  these  ideas  Vail 
saved  the  United  States  from  the  chaos  which  ex 
ists  in  certain  other  countries,  such  as  France,  where 
each  subscriber  purchases  his  own  instrument, 


110  THE  AGE  OF  BIG  BUSINESS 

making  his  selection  from  about  forty  different 
varieties.  That  certain  dangers  were  inherent  in 
this  universal  system  Vail  understood.  Monop 
oly  all  too  likely  brings  in  excessive  charges,  poor 
service,  and  inside  speculation;  but  it  was  Vail's 
plan  to  justify  his  system  by  its  works.  To  this 
end  he  established  a  great  engineering  department 
which  should  study  all  imaginable  mechanical  im 
provements,  with  the  results  which  have  been  de 
scribed.  He  gave  the  greatest  attention  to  every 
detail  of  the  service  and  particularly  insisted  on  the 
fairest  and  most  courteous  treatment  of  the  public. 
The  "please"  which  invariably  accompanies  the 
telephone  girl's  request  for  a  number  —  the  fa 
miliar  "number,  please"  —  is  a  trifle,  but  it  epito 
mizes  the  whole  spirit  which  Vail  inspired  through 
out  his  entire  organization.  Though  there  are 
plenty  of  people  who  think  that  the  existing 
telephone  charges  are  too  high,  the  fact  remains 
that  the  rate  has  steadily  declined  with  the  exten 
sion  of  the  business.  Vail  has  also  kept  his  com 
pany  clear  from  the  financial  scandals  that  have 
disgraced  so  many  other  great  corporations.  He 
has  never  received  any  reward  himself  except  his 
salary,  such  fortune  as  he  possesses  being  the  result 
of  personal  business  ventures  in  South  America 


THE  TELEPHONE  111 

during  the  twenty  years  from  1887  to  1907  that 
he  was  not  associated  with  the  Bell  interests. 

VaiPs  first  achievement  was  to  rescue  this  in 
vention  from  the  greatest  calamity  which  would 
have  befallen  it.  The  Western  Union  Telegraph 
Company,  which  in  the  early  days  had  looked  upon 
the  telephone  as  negligible,  suddenly  awoke  one 
morning  to  a  realization  of  its  importance.  This 
corporation  had  recently  introduced  its  "printing 
telegraph,"  a  device  that  made  it  possible  to 
communicate  without  the  intermediary  operator. 
When  news  reached  headquarters  that  subscribers 
were  dropping  this  new  contrivance  and  subscrib 
ing  to  telephones,  the  Western  Union  first  un 
derstood  that  a  competitor  had  entered  their 
field.  Promptly  organizing  the  American  Speaking 
Telephone  Company,  the  Western  Union,  with  all 
its  wealth  and  prestige,  proceeded  to  destroy  this 
insolent  pigmy.  Its  methods  of  attack  were  un 
scrupulous  and  underhanded,  the  least  discredit 
able  one  being  the  use  of  its  political  influence  to 
prevent  communities  from  giving  franchises  to  the 
Bell  Company.  But  this  corporation  mainly  relied 
for  success  upon  the  wholesale  manner  in  which  it 
infringed  the  Bell  patents.  It  raked  together  all 
possible  claimants  to  priority,  from  Philip  Reis 


112  THE  AGE  OF  BIG  BUSINESS 

to  Elisha  Gray,  in  its  attempts  to  discredit  Bell 
as  the  inventor.  The  Western  Union  had  only 
one  legitimate  advantage  —  the  Edison  transmit 
ter —  which  was  unquestionably  much  superior  to 
anything  which  the  Bell  Company  then  possessed. 
Many  Bell  stockholders  were  discouraged  in  face  of 
this  fierce  opposition  and  wished  to  abandon  the 
fight.  Not  so  Vail.  The  mere  circumstance  that 
the  great  capitalists  of  the  Western  Union  had 
taken  up  the  telephone  gave  the  public  a  confidence 
in  its  value  which  otherwise  it  would  not  have  had, 
a  fact  which  Vail  skillfully  used  in  attracting  in 
fluential  financial  support.  He  boldly  sued  the 
Western  Union  in  1878  for  infringement  of  the  Bell 
patents.  The  case  was  a  famous  one;  the  whole 
history  of  the  telephone  was  reviewed  from  the 
earliest  days,  and  the  evidence  as  to  rival  claimants 
was  placed  on  record  for  all  time.  After  about  a 
year,  Mr.  George  Clifford,  perhaps  the  best  patent 
attorney  of  the  day,  who  was  conducting  the  case 
for  the  Western  Union,  quietly  informed  his  clients 
that  they  could  never  win,  for  the  records  showed 
that  Bell  was  the  inventor.  He  advised  the  West 
ern  Union  to  settle  the  case  out  of  court  -and  his 
advice  was  taken.  This  great  corporation  war  was 
concluded  by  a  treaty  (November  10,  1879)  in 


THE  TELEPHONE  113 

which  the  Western  Union  acknowledged  that  Bell 
was  the  inventor,  that  his  patents  were  valid,  and 
agreed  to  retire  from  the  telephone  business.  The 
Bell  Company,  on  its  part,  agreed  to  buy  the  West 
ern  Union  Telephone  System,  to  pay  the  Western 
Union  a  royalty  of  twenty  per  cent  on  all  telephone 
rentals,  and  not  to  engage  in  the  telegraph  busi 
ness.  Had  this  case  been  decided  against  the  Bell 
Company  it  is  almost  certain  that  the  telephone 
would  have  been  smothered  in  the  interest  of  the 
telegraph  and  its  development  delayed  for  many 
years. 

Soon  after  the  settlement  of  the  Western  Union 
suit,  the  original  group  which  had  created  the  tele 
phone  withdrew  from  the  scene.  Bell  went  back  to 
teaching  deaf-mutes.  He  has  since  busied  himself 
with  the  study  of  airplanes  and  wireless,  and  has 
invented  an  instrument  for  transmitting  sound  by 
light.  The  new  telephone  company  offered  him 
$10,000  a  year  as  chief  inventor,  but  he  replied  that 
he  could  not  invent  to  order.  Thomas  Sanders  re 
ceived  somewhat  less  than  $1,000,000  and  lost  most 
of  it  exploiting  a  Colorado  gold  mine.  Gardiner 
Hubbard  withdrew  from  business  and  devoted  the 
last  years  of  his  life  to  the  National  Geographic 
Society.  Thomas  Watson,  after  retiring  from  the 


114  THE  AGE  OF  BIG  BUSINESS 

telephone  business,  bought  a  ship-building  yard 
near  Boston,  which  has  been  successful. 

In  making  this  settlement  with  the  Western 
Union,  the  Bell  interests  not  only  eliminated  a 
competitor  but  gained  great  material  advantages. 
They  took  over  about  56,000  telephone  stations 
located  in  55  cities  and  towns.  They  also  soon  ac 
quired  the  Western  Electric  Manufacturing  Com 
pany,  which  under  the  control  of  the  Western 
Union  had  developed  into  an  important  concern 
for  the  manufacture  of  telephone  supplies.  Un 
der  the  management  of  the  Bell  Company  this 
corporation,  which  now  has  extensive  factories  in 
Hawthorne,  111.,  produces  two-thirds  of  the  world's 
telephone  apparatus.  With  the  Western  Electric 
Vail  has  realized  the  fundamental  conception  un 
derlying  his  ideal  telephone  system  —  the  stand 
ardization  of  equipment.  For  the  accomplishment 
of  his  idea  of  a  national  telephone  system,  instead 
of  a  parochial  one,  Mr.  Vail  organized,  in  1881,  the 
American  Bell  Telephone  Company,  a  corporation 
that  really  represented  the  federalization  of  all  the 
telephone  activities  of  the  subsidiary  companies. 
The  United  States  was  divided  into  several  sections, 
in  each  of  which  a  separate  company  was  organ 
ized  to  develop  the  telephone  possibilities  of  that 


THE  TELEPHONE  115 

particular  area.  In  1899  the  American  Telephone 
and  Telegraph  Company  took  over  the  business  and 
properties  of  the  American  Bell  Company.  The 
larger  corporation  built  toll  lines,  connected  these 
smaller  systems  with  one  another,  and  thus  made  it 
possible  for  Washington  to  talk  to  New  York,  New 
York  to  Chicago,  and  ultimately  —  Boston  to  San 
Francisco.  An  enlightened  policy  led  the  Bell  Com 
pany  frequently  to  establish  exchanges  in  places 
where  there  was  little  chance  of  immediate  profit. 
Under  this  stimulation  the  use  of  this  instrument 
extended  rapidly,  yet  it  is  in  the  last  twenty 
years  that  the  telephone  has  grown  with  accel 
erated  momentum.  In  1887  there  were  170,000 
subscribers  in  the  United  States,  and  in  1900 
there  were  610,000;  but  in  1906  the  American 
Telephone  and  Telegraph  Company  was  furnishing 
its  service  to  2,550,000  stations,  and  in  1916  to 
10,000,000.  Clearly  it  is  only  since  1900  that  the 
telephone  has  become  a  commonplace  of  American 
existence.  Up  to  1900  it  had  grown  at  the  rate  of 
about  13,000  a  year;  whereas  since  1900  it  has 
grown  at  the  rate  of  700,000  a  year.  The  explana 
tion  is  that  charges  have  been  so  reduced  that  the 
telephone  has  been  brought  within  the  reach  of 
practically  every  business  house  and  every  family. 


116  THE  AGE  OF  BIG  BUSINESS 

Until  the  year  1900  every  telephone  subscriber  had 
to  pay  $240  a  year,  and  manifestly  only  families  in 
affluent  circumstances  could  afford  such  a  luxury. 
About  that  time  a  new  system  of  charges  known  as 
the  "message  rate'*  plan  was  introduced,  according 
to  which  the  subscriber  paid  a  moderate  price  for  a 
stipulated  number  of  calls,  and  a  pro  rata  charge 
for  all  calls  in  excess  of  that  number.  Probably 
no  single  change  in  any  business  has  had  such  an 
instantaneous  effect.  The  telephone,  which  had 
hitherto  been  an  external  symbol  of  prosperity, 
suddenly  became  the  possession  of  almost  every 
citizen. 

Other  companies  than  the  Bell  interests  have 
participated  in  this  development.  The  only  time 
the  Bell  Company  has  had  no  competitor,  Mr.  Vail 
has  said,  was  at  the  Philadelphia  Centennial  in 
1876.  Some  of  this  competition  has  benefited  the 
public  but  much  of  it  has  accomplished  little  except 
to  enrich  many  not  over-scrupulous  promoters. 
Groups  of  farmers  who  frequently  started  com 
panies  to  furnish  service  at  cost  did  much  to  extend 
the  use  of  the  telephone.  Many  of  the  companies 
which,  when  the  Bell  patents  expired  in  1895, 
sprang  up  in  the  Middle  West,  also  manifested 
great  enterprise  and  gave  excellent  service.  These 


THE  TELEPHONE  117 

companies  have  made  valuable  contributions,  of 
which  perhaps  the  automatic  telephone,  an  instru 
ment  which  enables  a  subscriber  to  call  up  his 
"party"  directly,  without  the  mediation  of  "cen 
tral,"  is  the  most  ingenious.  Although  due  ac 
knowledgment  must  be  made  of  the  honesty  and 
enterprise  with  which  hundreds  of  the  independ 
ents  are  managed,  the  fact  remains  that  they  are  a 
great  economic  waste.  Most  of  them  give  only  a 
local  service,  no  company  having  yet  arisen  which 
aims  to  duplicate  the  comprehensive  national  plans 
of  the  greater  corporation.  As  soon  as  an  inde 
pendent  obtains  a  foothold,  the  natural  consequence 
is  that  every  business  house  and  private  household 
must  either  be  contented  with  half  service,  or 
double  the  cost  of  the  telephone  by  subscribing  to 
two  companies.  It  is  not  unlikely  that  the  "inde 
pendents"  have  exercised  a  wholesome  influence 
upon  the  Bell  Corporation,  but,  as  the  principle  of 
government  regulation  rather  than  individual  com 
petition  has  now  become  the  established  method  of 
controlling  monopoly,  this  influence  will  possess 
less  virtue  in  the  future.  In  addition  to  these  inde 
pendent  enterprises,  the  telephone  has  unfortu 
nately  furnished  an  opportunity  for  stock-jobbing 
schemes  on  a  considerable  scale.  The  years  from 


118  THE  AGE  OF  BIG  BUSINESS 

1895  to  1905  witnessed  the  growth  of  many  bubbles 
of  this  kind;  one  group  of  men  organized  not 
far  from  two  hundred  telephone  companies.  They 
would  go  into  selected  communities,  promise  a  su 
perior  service  at  half  the  current  rates,  enlist  the 
cooperation  of  "leading"  business  men,  sell  the 
stock  largely  in  the  city  or  town  to  be  benefited, 
make  large  profits  in  the  construction  of  the  lines 
and  the  sale  of  equipment  —  and  then  decamp  for 
pastures  new.  The  multitudinous  bankruptcies 
that  followed  in  the  wake  of  such  exploiters  at 
length  brought  their  activities  to  an  end. 


CHAPTER  V 

THE   DEVELOPMENT   OF   PUBLIC   UTILITIES 

THE  streets  of  practically  all  American  cities,  as 
they  appeared  in  1870  and  as  they  appear  today, 
present  one  of  the  greatest  contrasts  in  our  indus 
trial  development.  Fifty  years  ago  only  a  few 
flickering  gas  lamps  lighted  the  most  traveled 
thoroughfares.  Only  the  most  prosperous  business 
houses  and  homes  had  even  this  expensive  illumin 
ation;  most  obtained  their  artificial  light  from  the 
new  illuminant  known  as  kerosene.  But  it  was  the 
mechanism  of  city  transportation  that  would  have 
looked  the  strangest  in  our  eyes.  New  York  City 
had  built  the  world's  first  horse-car  line  in  1832,  and 
since  that  year  this  peculiarly  American  contriv 
ance  has  had  the  most  extended  development.  In 
1870,  indeed,  practically  every  city  of  any  impor 
tance  had  one  or  more  railways  of  this  type.  New 
York  possessed  thirty  different  companies,  each 
operating  an  independent  system.  In  Philadelphia, 

119 


ISO  THE  AGE  OF  BIG  BUSINESS 

Chicago,  St.  Louis,  and  San  Francisco  the  growth 
of  urban  transportation  had  been  equally  hap 
hazard.  The  idea  of  combining  the  several  street 
railways  into  one  comprehensive  corporation  had 
apparently  occurred  to  no  one.  The  passengers, 
in  their  peregrinations  through  the  city,  had  fre 
quently  to  pay  three  or  four  fares;  competition  was 
thus  the  universal  rule.  The  mechanical  equipment 
similarly  represented  a  primitive  state  of  organi 
zation.  Horses  and  mules,  in  many  cases  hideous 
physical  specimens  of  their  breeds,  furnished  the 
motive  power.  The  cars  were  little  "bobtailed" 
receptacles,  usually  badly  painted  and  more  often 
than  not  in  a  desperate  state  of  disrepair.  In 
many  cities  the  driver  presided  as  a  solitary  auto 
crat;  the  passengers  on  entrance  deposited  their 
coins  in  a  little  fare  box.  At  night  tiny  oil  lamps 
made  the  darkness  visible;  in  winter  time  shiver 
ing  passengers  warmed  themselves  by  pulling  their 
coat  collars  and  furs  closely  about  their  necks  and 
thrusting  their  lower  members  into  a  heap  of  straw, 
piled  almost  a  foot  deep  on  the  floor. 

Who  would  have  thought,  forty  years  ago,  that 
the  lighting  of  these  dark  and  dirty  streets  and  the 
modernization  of  these  local  railway  systems  would 
have  given  rise  to  one  of  the  most  astounding 


PUBLIC  UTILITIES  121 

chapters  in  our  financial  history  and  created  hun 
dreds,  perhaps  thousands,  of  millionaires?  When 
Thomas  A.  Edison  invented  the  incandescent  light, 
and  when  Frank  J.  Sprague  in  1887  constructed  the 
first  practicable  urban  trolley  line,  in  Richmond, 
Virginia,  they  liberated  forces  that  powerfully  af 
fected  not  only  our  social  and  economic  life  but  our 
political  institutions.  These  two  inventions  intro 
duced  a  new  phrase  —  "Public  Utilities."  Com 
bined  with  the  great  growth  and  prosperity  of  the 
cities  they  furnished  a  fruitful  opportunity  to  several 
particularly  famous  groups  of  financial  adventurers. 
They  led  to  the  organization  of  "  syndicates  "  which 
devoted  all  their  energies,  for  a  quarter  of  a  century, 
to  exploiting  city  lighting  and  transportation  sys 
tems.  These  syndicates  made  a  business  of  enter 
ing  city  after  city,  purchasing  the  scattered  street 
railway  lines  and  lighting  companies,  equipping 
them  with  electricity,  combining  them  into  unified 
systems,  organizing  large  corporations,  and  float 
ing  huge  issues  of  securities.  A  single  group  of  six 
men  —  Yerkes,  Widener,  Elkins,  Dolan,  Whitney, 
and  Ryan  —  combined  the  street  railways,  and 
in  many  cases  the  lighting  companies,  of  New 
York,  Philadelphia,  Chicago,  Pittsburgh,  and  at 
least  a  hundred  towns  and  cities  in  Pennsylvania, 


122  THE  AGE  OF  BIG  BUSINESS 

Connecticut,  Rhode  Island,  Massachusetts,  Ohio, 
Indiana,  New  Hampshire,  and  Maine.  Either 
jointly  or  separately  they  controlled  the  gas  and 
electric  lighting  companies  of  Philadelphia,  Read 
ing,  Harrisburg,  Atlanta,  Vicksburg,  St.  Augustine, 
Minneapolis,  Omaha,  Des  Moines,  Kansas  City, 
Sioux  City,  Syracuse,  and  about  seventy  other 
communities.  A  single  corporation  developed 
nearly  all  the  trolley  lines  and  lighting  companies 
of  New  Jersey;  another  controlled  similar  utilities 
in  San  Francisco  and  other  cities  on  the  Pacific 
Coast.  In  practically  all  instances  these  syndi 
cates  adopted  precisely  the  same  plan  of  operation. 
In  so  far  as  their  activities  resulted  in  cheap,  com 
fortable,  rapid,  and  comprehensive  transit  systems 
and  low-priced  illumination,  their  activities  greatly 
benefited  the  public.  The  future  historian  of 
American  society  will  probably  attribute  enormous 
influence  to  the  trolley  car  in  linking  urban  com 
munity  with  urban  community,  in  extending  the 
radius  of  the  modern  city,  in  freeing  urban  workers 
from  the  demoralizing  influences  of  the  tenement, 
in  offering  the  poorer  classes  comfortable  homes  in 
the  surrounding  country,  and  in  extending  general 
enlightenment  by  bringing  about  a  closer  human 
intercourse.  Indeed,  there  is  probably  no  single 


PUBLIC  UTILITIES  123 

influence  that  has  contributed  so  much  to  the  pleas 
ure  and  comfort  of  the  masses  as  the  trolley  car. 
Yet  the  story  that  I  shall  have  to  tell  is  not  a 
pleasant  one.  It  is  impossible  to  write  even  a 
brief  outline  of  this  development  without  plung 
ing  deeply  into  the  two  phases  of  American  life  of 
which  we  have  most  cause  to  be  ashamed;  these  are 
American  municipal  politics  and  the  speculative 
aspects  of  Wall  Street.  The  predominating  in 
fluences  in  American  city  life  have  been  the  great 
franchise  corporations.  Practically  all  the  men 
that  have  had  most  to  do  with  developing  our 
public  utilities  have  also  had  the  greatest  influence 
in  city  politics.  In  New  York,  Thomas  F.  Ryan 
and  William  C.  Whitney  were  the  powerful,  though 
invisible,  powers  in  Tammany  Hall.  In  Chicago, 
Charles  T.  Yerkes  controlled  mayors  and  city 
councils;  he  even  extended  his  influence  into  the 
state  government,  controlling  governors  and  leg 
islatures.  In  Philadelphia,  Widener  and  Elkins 
dominated  the  City  Hall  and  also  became  part  of 
the  Quay  machine  of  Pennsylvania.  Mark  Hanna, 
the  most  active  force  in  Cleveland  railways,  was 
also  the  political  boss  of  the  State.  Roswell  P. 
Flower,  chief  agent  in  developing  Brooklyn  Rapid 
Transit,  had  been  Governor  of  New  York;  Patrick 


124  THE  AGE  OF  BIG  BUSINESS 

Calhoun,  who  monopolized  the  utilities  of  San 
Francisco  and  other  cities,  presided  likewise  over 
the  city's  inner  politics.  The  Public  Service  Cor 
poration  of  New  Jersey  also  comprised  a  large 
political  power  in  city  and  state  politics.  It  is 
hardly  an  exaggeration  to  say  that  in  the  most  ac 
tive  period,  that  from  1880  to  1905,  the  powers 
that  developed  city  railway  and  lighting  companies 
in  American  cities  were  identically  the  same  owners 
that  had  the  most  to  do  with  city  government.  In 
the  minds  of  these  men  politics  was  necessarily  as 
much  a  part  of  their  business  as  trolley  poles  and 
steel  rails.  This  type  of  capitalist  existed  only  on 
public  franchises  —  the  right  to  occupy  the  public 
streets  with  their  trolley  cars,  gas  mains,  and  elec 
tric  light  conduits;  they  could  obtain  these  privi 
leges  only  from  complaisant  city  governments,  and 
the  simplest  way  to  obtain  them  was  to  control 
these  governments  themselves.  Herein  we  have 
the  simple  formula  which  made  possible  one  of  the 
most  profitable  and  one  of  the  most  adventurous 
undertakings  of  our  time. 

An  attempt  to  relate  the  history  of  all  these 
syndicates  would  involve  endless  repetition.  If 
we  have  the  history  of  one  we  have  the  history 
of  practically  all.  I  have  therefore  selected,  as 


PUBLIC  UTILITIES  125 

typical,  the  operations  of  the  group  that  devel 
oped  the  street  railways  and,  to  a  certain  extent, 
the  public  lighting  companies,  in  our  three  great 
est  American  cities  —  New  York,  Chicago,  and 
Philadelphia. 

One  of  the  men  who  started  these  enterprises  ac 
tually  had  a  criminal  record.  William  H.  Kem- 
ble,  an  early  member  of  the  Philadelphia  group,  had 
been  indicted  for  attempting  to  bribe  the  Penn 
sylvania  Legislature;  he  had  been  convicted  and 
sentenced  to  one  year  in  the  county  jail  and  had 
escaped  imprisonment  only  by  virtue  of  a  pardon 
obtained  through  political  influence.  Charles  T. 
Yerkes,  one  of  his  partners  in  politics  and  street 
railway  enterprises,  had  been  less  fortunate,  for  he 
had  served  seven  months  for  assisting  in  the  em 
bezzlement  of  Philadelphia  funds  in  1873.  It  was 
this  circumstance  in  Yerkes's  career  which  impelled 
him  to  leave  Philadelphia  and  settle  in  Chicago 
where,  starting  as  a  small  broker,  he  ultimately  ac 
quired  sufficient  resources  and  influence  to  embark 
in  that  street  railway  business  at  which  he  had  al 
ready  served  an  extensive  apprenticeship.  Under 
his  domination,  the  Chicago  aldermen  attained  a 
depravity  that  made  them  notorious  all  over  the 
world.  They  openly  sold  Yerkes  the  use  of  the 


126  THE  AGE  OF  BIG  BUSINESS 

streets  for  cash  and  constantly  blocked  the  efforts 
which  an  infuriated  populace  made  for  reform. 
Yerkes  purchased  the  old  street  railway  lines,  lined 
his  pockets  by  making  contracts  for  their  recon 
struction,  issued  large  flotations  of  watered  stock, 
heaped  securities  upon  securities  and  reorganiza 
tion  upon  reorganization  and  diverted  their  assets 
to  business  in  a  hundred  ingenious  ways. 

In  spite  of  the  crimes  which  Yerkes  perpetrated 
in  American  cities,  there  was  something  refreshing 
and  ingratiating  about  the  man.  Possibly  this  is 
because  he  did  not  associate  any  hypocrisy  with 
his  depredations.  "The  secret  of  success  in  my 
business,"  he  once  frankly  said,  "is  to  buy  old 
junk,  fix  it  up  a  little,  and  unload  it  upon  other 
fellows. "  Certain  of  his  epigrams  —  such  as,  "It  is 
the  strap-hanger  who  pays  the  dividends"  —  have 
likewise  given  him  a  genial  immortality.  The  fact 
that,  after  having  reduced  the  railway  system  of 
Chicago  to  financial  pulp  and  physical  dissolution, 
he  finally  unloaded  the  whole  useless  mass,  at  a 
handsome  personal  profit,  upon  his  old  New  York 
friends,  Whitney  and  Ryan,  and  decamped  to  Lon 
don,  where  he  carried  through  huge  transit  en 
terprises,  clearly  demonstrated  that  Yerkes  was  a 
buccaneer  of  no  ordinary  caliber. 


PUBLIC  UTILITIES  127 

Yerkes's  difficulties  in  Philadelphia  indirectly 
made  possible  the  career  of  Peter  A.  B.  Widener. 
For  Yerkes  had  become  involved  in  the  defalcation 
of  the  City  Treasurer,  Joseph  P.  Mercer,  whose 
translation  to  the  Eastern  Penitentiary  left  vacant 
a  municipal  office  into  which  Mr.  Widener  now 
promptly  stepped.  Thus  Mr.  Widener,  as  is  prac 
tically  the  case  with  all  these  street  railway  mag 
nates,  was  a  municipal  politician  before  he  became 
a  financier.  The  fact  that  he  attained  the  city 
treasurership  shows  that  he  had  already  gone  far, 
for  it  was  the  most  powerful  office  in  Philadelphia. 
He  had  all  those  qualities  of  suavity,  joviality, 
firmness,  and  personal  domination  that  made  pos 
sible  success  in  American  local  politics  a  generation 
ago.  His  occupation  contributed  to  his  advance 
ment.  In  recent  years  Mr.  Widener,  as  the  owner 
of  great  art  galleries  and  the  patron  of  philanthrop 
ic  and  industrial  institutions,  has  been  a  national 
figure  of  the  utmost  dignity.  Had  you  dropped 
into  the  Spring  Garden  Market  in  Philadelphia 
forty  years  ago,  you  would  have  found  a  portly 
gentleman,  clad  in  a  white  apron,  and  armed  with 
a  cleaver,  presiding  over  a  shop  decorated  with 
the  design  —  "Peter  A.  B.  Widener,  Butcher. "  He 
was  constantly  joking  with  his  customers  and 


128  THE  AGE  OF  BIG  BUSINESS 

visitors,  and  in  the  evening  he  was  accustomed  to 
foregather  with  a  group  of  well-chosen  spirits  who 
had  been  long  famous  in  Philadelphia  as  the  "all- 
night  poker  players. "  A  successful  butcher  shop 
in  Philadelphia  in  those  days  played  about  the 
same  part  in  local  politics  as  did  the  saloon  in  New 
York  City.  Such  a  station  became  the  headquar 
ters  of  political  gossip  and  the  meeting  ground  of 
a  political  clique;  and  so  Widener,  the  son  of  a 
poor  German  bricklayer,  rapidly  became  a  political 
leader  in  the  Twentieth  Ward,  and  soon  found  his 
power  extending  even  to  Harrisburg.  A  few  years 
ago  Widener  presided  over  a  turbulent  meeting  of 
Metropolitan  shareholders  in  Newark,  New  Jersey. 
The  proposal  under  consideration  was  the  trans 
ference  of  all  the  Metropolitan's  visible  assets  to 
a  company  of  which  the  stockholders  knew  noth 
ing.  When  several  of  these  stockholders  arose 
and  demanded  that  they  be  given  an  opportunity 
to  discuss  the  projected  lease,  Widener  turned  to 
them  and  said,  in  his  politest  and  blandest  man 
ner:  "You  can  vote  first  and  discuss  afterward." 
Widener  displayed  precisely  these  same  qualities  of 
ingratiating  arrogance  and  good-natured  contempt 
as  a  Philadelphia  politician.  He  was  a  man  of 
big  frame,  alert  and  decisive  in  his  movements, 


PUBLIC  UTILITIES  129 

and  a  ready  talker;  in  business  he  was  given  much 
to  living  in  the  clouds  —  a  born  speculator  —  em 
phatically  a  "boomer. "  His  sympathies  were  gen 
erous,  at  times  emotional;  it  is  said  that  he  has 
even  been  known  to  weep  when  discussing  his  fine 
collection  of  Madonnas.  He  showed  this  personal 
side  in  his  lifelong  friendship  and  business  associa 
tion  with  William  L.  Elkins,  a  man  much  inferior 
to  him  in  ability.  Indeed,  Elkins's  great  fortune 
was  little  more  than  a  free  gift  from  Widener,  who 
carried  him  as  a  partner  in  all  his  deals.  Elkins 
became  Widener's  bondsman  when  the  latter  en 
tered  the  City  Treasurer's  office;  the  two  men  lived 
near  each  other  on  the  same  street,  and  this  asso 
ciation  was  cemented  when  Widener's  oldest  son 
married  Elkins's  daughter.  Elkins  had  started  life 
as  an  entry  clerk  in  a  grocery  store,  had  made 
money  in  the  butter  and  egg  business,  had  "struck 
oil"  at  Titusville  in  1862,  and  had  succeeded  in  ex 
changing  his  holdings  for  a  block  of  Standard  Oil 
stock.  He  too  became  a  Philadelphia  politician, 
but  he  had  certain  hard  qualities  —  he  was  close- 
fisted,  slow,  plodding  —  that  prevented  him  from 
achieving  much  success. 

For  the  other  members  of  this  group  we  must  now 
change  the  scene  to  New  York  City.     In  the  early 


130          THE  AGE  OF  BIG  BUSINESS 

eighties  certain  powerful  interests  had  f ormed  plans 
for  controlling  the  New  York  transit  fields.  Promi 
nent  among  them  was  William  Collins  Whitney,  a 
very  different  type  of  man  from  the  Philadelphians. 
Born  in  Con  way,  Massachusetts,  in  1841,  he  came 
from  a  long  line  of  distinguished  and  intellectual 
New  Englanders.  At  Yale  his  wonderful  mental 
gifts  raised  him  far  above  his  fellows;  he  divided  all 
scholastic  honors  there  with  his  classmate,  William 
Graham  Sumner,  afterwards  Yale's  great  political 
economist.  Soon  after  graduation  Whitney  came 
to  New  York  and  rapidly  forged  ahead  as  a  lawyer. 
Brilliant,  polished,  suave,  he  early  displayed  those 
qualities  which  afterward  made  him  the  master 
mind  of  presidential  Cabinets  and  the  maker  of 
American  Presidents.  Physically  handsome,  loved 
by  most  men  and  all  women,  he  soon  acquired  a 
social  standing  that  amounted  almost  to  a  dictator 
ship.  His  early  political  activities  had  greatly  bene 
fited  New  York.  He  became  a  member  of  that  group 
which,  under  the  leadership  of  Joseph  H.  Choate 
and  Samuel  J.  Tilden,  accomplished  the  downfall 
of  William  M.  Tweed.  Whitney  remained  Tilden's 
political  protege  for  several  years.  Though  high 
bred  and  luxury-loving,  as  a  young  man  he  was 
not  averse  to  hard  political  work,  and  many 


PUBLIC  UTILITIES  131 

old-timers  still  remember  the  days  when  "Bill" 
Whitney  delivered  cart- tail  harangues  on  the  lower 
east  side.  By  1884  he  had  become  the  most  prom 
inent  Democrat  in  New  York  —  always  a  foe  to 
Tammany  —  and  as  such  he  contributed  largely  to 
Cleveland's  first  election,  became  Secretary  of  the 
Navy  in  Cleveland's  cabinet  and  that  great  Presi 
dent's  close  friend  and  adviser.  As  Secretary  of 
the  Navy,  Whitney,  who  found  the  fleet  composed 
of  a  few  useless  hulks  left  over  from  the  days  of 
Farragut,  created  the  fighting  force  that  did  such 
efficient  service  in  the  Spanish  War.  The  fact 
that  the  United  States  is  now  the  third  naval 
power  is  largely  owing  to  these  early  activities  of 
Whitney. 

Certainly  all  this  national  service  forms  a  strange 
prelude  to  Whitney's  activities  in  the  public 
utilities  of  New  York  and  other  cities.  Had  he 
died,  indeed,  in  his  fiftieth  year,  his  name  would 
be  renowned  today  as  a  worker  for  the  highest 
ideals  of  American  citizenship.  What  suddenly 
made  him  turn  his  back  upon  his  past,  join  his 
former  enemies  in  Tammany  Hall,  and  engage 
in  these  great  speculative  enterprises?  The 
simplest  explanation  is  that,  with  his  ability  and 
ambition,  Whitney  had  the  luxurious  tastes  of  a 


132  THE  AGE  OF  BIG  BUSINESS 

Medici.  At  the  height  of  his  career  his  financial 
success  found  expression  in  a  magnificent  house 
which  he  established  on  Fifth  Avenue.  Its  furnish 
ings  were  one  of  the  wonders  of  New  York.  Whit 
ney  ransacked  the  art  treasures  of  Europe,  stripped 
medieval  castles  of  their  carvings  and  tapestries, 
ripped  whole  staircases  and  ceilings  from  the  repose 
of  centuries,  and  relaid  them  in  this  abode  of  splen 
dor,  and  here  he  entertained  with  a  lavishness  that 
astounded  New  York.  This  single  exploit  pictures 
the  man.  Everything  that  Whitney  did  and  was 
—  his  house,  his  financial  transactions,  his  Wall 
Street  speculations,  the  rewards  which  he  gave  his 
friends  —  assumed  heroic  proportions.  But  these 
things  all  demanded  money.  The  dilapidated 
horse  railways  of  New  York  offered  him  his  most 
convenient  opportunity  for  amassing  it. 

But  Whitney  had  not  proceeded  far  when  he 
came  face  to  face  with  a  quiet  and  energetic  young 
man  who  had  already  made  considerable  progress 
in  the  New  York  transit  field.  This  was  a  Vir 
ginian  of  South  Irish  descent  who  had  started  life 
as  a  humble  broker's  clerk  twelve  or  fourteen  years 
before.  His  name  was  Thomas  Fortune  Ryan. 
Few  men  have  wielded  greater  power  in  Ameri 
can  finance,  but  in  1884  Ryan  was  merely  a 


;   PUBLIC  UTILITIES  133 

ruddy-faced,  clean-cut,  and  clean-living  Irishman 
of  thirty-three,  who  could  be  depended  on  to  exe 
cute  quickly  and  faithfully  orders  on  the  New  York 
Stock  Exchange  —  eren  though  they  were  small 
ones  —  and  who,  in  unostentatious  fashion,  had 
already  acquired  much  influence  in  Tammany  Hall. 
With  his  six  feet  of  stature,  his  extremely  slender 
figure,  his  long  legs,  his  long  arms,  his  raiment  — 
which  always  represented  the  height  of  fashion  and 
tended  slightly  toward  the  flashy  —  Ryan  made 
a  conspicuous  figure  wherever  he  went.  He  was 
born  in  1851,  on  a  small  farm  in  Nelson  County, 
Virginia.  The  Civil  War,  which  broke  out  when 
Ryan  was  a  boy  of  ten,  destroyed  the  family  for 
tune  and  in  1868,  when  seventeen,  he  began  life 
as  a  dry-goods  clerk  in  Baltimore,  fulfilling  the 
tradition  of  the  successful  country  boy  in  the  large 
city  by  marrying  his  employer's  daughter.  When 
his  father-in-law  failed,  in  1870,  Ryan  came  to 
New  York,  went  to  work  in  a  broker's  office,  and 
succeeded  so  well  that,  in  a  few  years,  he  was  able 
to  purchase  a  seat  on  the  Stock  Exchange.  He 
was  sufficiently  skillful  as  a  broker  to  number  Jay 
Gould  among  his  customers  and  to  inspire  a  proph 
ecy  by  William  C.  Whitney  that,  if  he  retained 
his  health,  he  would  become  one  of  the  richest  men 


134          THE  AGE  OF  BIG  BUSINESS 

in  the  country.  Afterwards,  when  he  knew  him 
more  intimately,  Whitney  elaborated  this  esti 
mate  by  saying  that  Ryan  was  "the  most  adroit, 
suave,  and  noiseless  man  he  had  ever  known." 
Ryan  had  two  compelling  traits  that  soon  won 
for  him  these  influential  admirers.  First  of  all  was 
his  marvelous  industry.  His  genius  was  not  spas 
modic.  He  worked  steadily,  regularly,  never  losing 
a  moment,  never  getting  excited,  going,  day  after 
day,  the  same  monotonous  dog-trot,  easily  outdis 
tancing  scores  of  apparently  stronger  men.  He 
also  had  the  indispensable  faculty  of  silence.  He 
has  always  been  the  least  talkative  man  in  Wall 
Street,  but,  with  all  his  reserve,  he  has  remained 
the  soul  of  courtesy  and  outward  good  nature. 

Here,  then,  we  have  the  characters  of  this  great 
impending  drama  —  Yerkes  in  Chicago,  Widener 
and  Elkins  in  Philadelphia,  Whitney  and  Ryan  in 
New  York.  These  five  men  did  not  invariably 
work  as  a  unit.  Yerkes,  though  he  had  consider 
able  interest  in  Philadelphia,  which  had  been  the 
scene  of  his  earliest  exploits,  limited  his  activities 
largely  to  Chicago.  Widener  and  Elkins,  however, 
not  only  dominated  Philadelphia  traction  but 
participated  in  all  of  Yerkes's  enterprises  in  Chi 
cago  and  held  an  equal  interest  with  Whitney  and 


PUBLIC  UTILITIES  135 

Ryan  in  New  York.  The  latter  Metropolitan  pair, 
though  they  confined  their  interest  chiefly  to  their 
own  city,  at  times  transferred  their  attention  to 
Chicago.  Thus,  for  nearly  thirty  years,  these  five 
men  found  their  oyster  in  the  transit  systems  of 
America's  three  greatest  cities  —  and,  for  that 
matter,  in  many  others  also. 

An  attempt  to  trace  the  convolutions  of  Amer 
ica's  street  railway  and  public  lighting  finance 
would  involve  a  puzzling  array  of  statistics  and  an 
inextricable  complexity  of  stocks,  bonds,  leases, 
holding  companies,  operating  companies,  construc 
tion  companies,  reorganizations,  and  the  like. 
Difficult  and  apparently  impenetrable  as  is  this 
financial  morass,  the  essential  facts  still  stand  out 
plainly  enough.  As  already  indicated,  the  funda 
mental  basis  upon  which  the  whole  system  rested 
was  the  control  of  municipal  politics.  The  story 
of  the  Metropolitan's  manipulation  of  the  New 
York  street  railways  starts  with  one  of  the  most 
sordid  episodes  in  the  municipal  annals  of  Amer 
ica's  largest  city.  Somewhat  more  than  thirty 
years  ago,  a  group  of  New  York  city  fathers  ac 
quired  an  international  fame  as  the  "boodle  alder 
men.  "  These  men  had  finally  given  way  to  the  im 
portunities  of  a  certain  Jacob  Sharp,  an  eccentric 


136  THE  AGE  OF  BIG  BUSINESS 

New  York  character,  who  had  for  many  years 
operated  New  York  City  railways,  and  granted  a 
franchise  for  the  construction  of  a  horse-car  line 
on  lower  Broadway.  Soon  after  voting  this  fran 
chise,  regarded  as  perhaps  the  most  valuable  in 
the  world,  these  same  aldermen  had  begun  to 
wear  diamonds,  to  purchase  real  estate,  and  give 
other  outward  evidences  of  unexpected  prosper 
ity.  Presently,  however,  these  city  fathers  started 
a  migration  to  Canada,  Mexico,  Spain,  and  other 
countries  where  the  processes  of  extradition  did 
not  work  smoothly.  Sharp's  enemies  had  suc 
ceeded  in  precipitating  a  legislative  investigation 
under  the  very  capable  leadership  of  Roscoe  Conk- 
ling,  who  had  little  difficulty  in  showing  that  Sharp 
had  purchased  his  aldermen  for  $500,000  cash.  In 
a  short  time,  such  of  the  aldermen  as  were  ac 
cessible  to  the  police  were  languishing  in  prison, 
and  Sharp  had  been  arrested  on  twenty-one  indict 
ments  for  bribery  and  sentenced  to  four  years' 
hard  labor  —  a  sentence  which  he  was  saved  from 
serving  by  his  lonely  and  miserable  death  in  Lud- 
low  Street  Jail.  In  the  delirium  preceding  his 
dissolution  Sharp  raved  constantly  about  his 
Broadway  railroad  and  his  enemies;  it  was  ap 
parently  his  belief  that  the  investigation  which  had 


PUBLIC  UTILITIES  137 

uncovered  his  rascality  and  the  subsequent  "per 
secutions"  had  been  engineered  by  certain  of  his 
rivals,  either  to  compel  Sharp  to  disgorge  his  fran 
chise  or  to  produce  the  facts  that  would  jus 
tify  the  legislature  in  annulling  it  on  the  ground 
of  fraud. 

Though  the  complete  history  of  this  transaction 
can  never  be  written,  we  do  possess  certain  facts 
that  lend  some  color  to  this  diagnosis.  Up  to  the 
time  that  Sharp  had  captured  this  franchise,  Ryan, 
Whitney,  and  the  Philadelphians  —  not  as  part 
ners,  but  as  rivals  —  had  competed  with  him  for 
this  prize.  At  the  trial  of  Arthur  J.  McQuade  in 
1886,  a  fellow  conspirator,  who  bore  the  somewhat 
suggestive  name  of  Fullgraff ,  related  certain  details 
which,  if  true,  would  indicate  that  Sharp's  methods 
differed  from  those  of  his  rivals  only  hi  that  they 
had  proved  more  successful.  Thirteen  members  of 
the  Board  of  Aldermen,  said  Fullgraff,  had  formed 
a  close  corporation,  elected  a  chairman,  and 
adopted  a  policy  of  "business  unity  in  all  important 
matters, "  which  meant  that  they  proposed  to  keep 
together  in  order  to  secure  the  highest  price  for  the 
Broadway  franchise.  The  cable  railroad,  which 
was  the  one  with  which  Mr.  Ryan  was  identified, 
offered  $750,000,  half  in  bonds  and  half  in  cash. 


138          THE  AGE  OF  BIG  BUSINESS 

Mr.  Sharp,  however,  offered  $500,000  all  in  cash. 
The  aldermen  voted  in  favor  of  Sharp  because  cash 
was  not  only  a  more  valuable  commodity  than  the 
bonds  but,  to  use  Alderman  Fullgraff  's  own  words 
—  "less  easily  traced."  That  Whitney  financed 
lawsuits  against  the  validity  of  Sharp's  franchise 
appears  upon  the  record,  and  that  Ryan  was  ac 
tively  promoting  the  Conkling  investigation,  is 
likewise  a  matter  of  evidence.  Sharp's  victory  had 
the  great  result  of  bringing  together  the  three  forces 
— Ryan,  Whitney,  and  the  Philadelphia^ —  who 
had  hitherto  combated  one  another  as  rivals;  that 
is,  it  caused  the  organization  of  the  famous  Whit- 
ney-Ryan-Widener-Elkins  syndicate.  If  these 
men  had  inspired  all  those  attacks  on  Sharp,  their 
maneuver  proved  successful;  for  when  the  investi 
gation  had  attained  its  climax  and  public  indigna 
tion  against  Sharp  had  reached  its  most  furious 
stage,  that  venerable  corruptionist,  worn  down  by 
ill  health,  and  almost  crazed  by  the  popular  outcry, 
sold  his  Broadway  railroad  to  Peter  A.  B.  Wide- 
ner,  William  L.  Elkins,  and  William  H.  Kemble. 
Thomas  F.  Ryan  became  secretary  of  the  new 
corporation,  and  William  C.  Whitney  an  active 
participant  in  its  affairs. 
This  Broadway  franchise  formed  the  vertebral 


PUBLIC  UTILITIES  139 

column  of  the  New  York  transit  system;  with  it 
as  a  basis,  the  operators  formed  the  Metropoli 
tan  Street  Railway  Company  in  1893,  commonly 
known  as  the  "Metropolitan."  They  organized 
also  the  Metropolitan  Traction  Company,  an  or 
ganization  which  enjoys  an  historic  position  as  the 
first  "holding  company"  ever  created  in  this  coun 
try.  Its  peculiar  attribute  was  that  it  did  not  con 
struct  and  operate  street  railways  itself,  but  merely 
owned  other  corporations  that  did  so.  Its  only 
assets,  that  is,  were  paper  securities  representing 
the  ownership  and  control  of  other  companies. 
This  "holding  company,"  which  has  since  become 
almost  a  standardized  form  of  corporation  control 
in  this  country,  was  the  invention  of  Mr.  Francis 
Lynde  Stetson,  one  of  America's  greatest  corpo 
ration  lawyers.  "Mr.  Stetson,"  Ryan  is  said  to 
have  remarked,  "do  you  know  what  you  did  when 
you  drew  up  the  papers  of  the  Metropolitan  Trac 
tion  Company?  You  made  us  a  great  big  tin  box. " 
The  plan  which  Whitney  and  his  associates  now 
followed  was  to  obtain  control,  in  various  ways, 
of  all  the  surface  railways  in  New  York  and  place 
them  under  the  leadership  of  the  Metropolitan. 
Through  their  political  influences  they  obtained 
franchises  of  priceless  value,  organized  subsidiary 


140          THE  AGE  OF  BIG  BUSINESS 

street  railway  companies,  and  exchanged  the  stock 
of  these  subsidiary  companies  for  that  of  the  Met 
ropolitan.  A  few  illustrations  will  show  the  char 
acter  of  these  transactions.  They  thus  acquired, 
practically  as  a  free  gift,  a  franchise  to  build  a  cable 
railroad  on  Lexington  Avenue.  At  an  extremely 
liberal  estimate,  this  line  cost  perhaps  $2,500,000 
to  construct,  yet  the  syndicate  turned  this  over  to 
the  Metropolitan  for  $10,000,000  of  Metropolitan 
securities.  They  similarly  acquired  a  franchise  for 
a  line  on  Columbus  Avenue,  spending  perhaps 
$500,000  in  construction,  and  handing  the  com 
pleted  property  over  to  the  Metropolitan  for  $6,- 
000,000.  In  exchange  for  these  two  properties, 
representing  a  real  investment,  it  has  been  main 
tained,  of  $3,000,000,  the  inside  syndicates  received 
securities  which  had  a  face  value  of  $16,000,000 
and  which,  as  will  appear  subsequently,  had  a 
market  cash  value  of  not  far  from  $25,000,000. 
They  purchased  an  old  horse-car  line  on  Fulton 
Street,  a  line  whose  assets  consisted  of  one-third 
of  a  mile  of  tracks,  ten  little  box  cars,  thirty 
horses,  and  an  operating  deficit  of  $40,000  a  year. 
At  auction,  its  visible  assets  might  have  brought 
$15,000;  yet  the  syndicate  turned  this  over  to  the 
Metropolitan  for  $1,000,000.  They  spent  $50,000 


PUBLIC  UTILITIES  141 

in  constructing  and  equipping  a  horse  railroad  on 
Twenty-eighth  and  Twenty-ninth  Streets  and 
turned  this  over  to  the  Metropolitan  for  $3,000,000. 
For  two  and  a  half  miles  of  railroad  on  Thirty- 
fourth  Street,  which  represented  a  cash  expendi 
ture  of  perhaps  $100,000,  they  received  $2,000,000 
of  Metropolitan  stock.  But  it  is  hardly  necessary 
to  catalogue  more  instances;  the  plan  of  operations 
must  now  be  fairly  evident.  It  was  for  the  mem 
bers  of  the  syndicate,  as  individuals,  to  collect  all 
the  properties  and  new  franchises  that  were  avail 
able  and  to  transfer  them  to  the  Metropolitan  at 
enormously  inflated  values.  So  far,  all  these  deals 
were  purely  stock  transactions  —  no  cash  had  yet 
changed  hands.  When  the  amalgamation  was  com 
plete,  the  insiders  found  themselves  in  possession 
of  large  amounts  of  Metropolitan  stock.  Their 
scheme  for  transforming  this  paper  into  more  tan 
gible  property  forms  the  concluding  chapter  of  this 
Metropolitan  story. x 

Nearly  all  the  properties  actually  purchased  and 
transferred  in  the  manner  described  above,  had 
little  earning  capacity,  and  therefore  little  value; 
they  were  decrepit  horse-car  lines  in  unprofitable 

1  In  1897  the  Traction  Company  dissolved,  after  distributing 
$6,000,000  as  "a  voluntary  dividend"  among  its  stockholders. 


142          THE  AGE  OF  BIG  BUSINESS 

territory.  The  really  valuable  roads  were  those 
that  traversed  the  great  north  and  south  thorough 
fares  —  Lenox,  Third,  Fourth,  Sixth,  Eighth,  and 
Ninth  Avenues.  Many  old  New  York  families  and 
estates  had  held  these  properties  for  years  and  had 
collected  large  annual  dividends  from  them.  Nat 
urally  they  had  no  desire  to  sell,  yet  their  acquisi 
tion  was  essential  to  the  monopoly  which  the  Whit 
ney-Ryan  syndicate  aspired  to  construct.  They 
finally  leased  all  these  roads,  under  agreements 
which  guaranteed  large  annual  rentals.  In  prac 
tically  all  these  cases  the  Metropolitan,  in  order  to 
secure  physical  possession,  agreed  to  pay  rentals 
that  far  exceeded  the  earning  capacity  of  the  road. 
What  is  the  explanation  of  such  insane  finance? 
We  do  not  have  the  precise  facts  in  the  matter 
of  the  New  York  railways;  but  similar  operations 
in  Chicago,  which  have  been  officially  made  pub 
lic,  shed  the  utmost  light  upon  the  situation.  In 
order  to  get  possession  of  a  single  road  in  Chicago, 
Widener  and  Elkins  guaranteed  a  thirty-five  per 
cent  dividend;  to  get  one  Philadelphia  line,  they 
guaranteed  65j^  per  cent  on  capital  paid  in.  This, 
of  course,  was  not  business;  the  motives  actuating 
the  syndicate  were  purely  speculative.  In  Chicago, 
Widener  and  Elkins  quietly  made  large  purchases 


PUBLIC  UTILITIES  143 

of  the  stock  in  these  roads  before  they  leased  them 
to  the  parent  company.  The  exceedingly  profit 
able  lease  naturally  gave  such  stocks  a  high  value, 
in  case  they  preferred  to  sell;  if  they  held  them, 
they  reaped  huge  rewards  from  the  leases  which 
they  had  themselves  decreed.  Perhaps  their  most 
remarkable  exploit  was  the  lease  of  the  West  Di 
vision  Railway  Company  of  Chicago  to  the  West 
Chicago  Street  Railroad.  Widener  and  Elkins  con 
trolled  the  West  Division  Railway;  their  partner, 
Charles  T.  Yerkes,  controlled  the  latter  corpora 
tion.  The  negotiation  of  a  lease,  therefore,  was  a 
purely  informal  matter;  the  partners  were  merely 
dealing  with  one  another;  yet  Widener  and  Elkins 
received  a  fee  of  $5,000,000  as  personal  compensa 
tion  for  negotiating  this  lease! 

But  this  whole  leasing  system,  both  in  New  York 
and  Chicago,  entailed  scandals  perhaps  even  more 
reprehensible.  All  these  leased  properties,  when 
taken  over,  were  horse-car  lines,  and  their  trans 
formation  into  electrically  propelled  systems  in 
volved  reconstruction  operations  on  an  extensive 
scale.  It  seems  perfectly  clear  that  the  chief  mo 
tive  which  inspired  these  extravagant  leases  was 
the  determination  of  the  individuals  who  made  up 
the  syndicate  to  obtain  physical  possession  and 


144  THE  AGE  OF  BIG  BUSINESS 

to  make  huge  profits  on  construction.  The  "con 
struction  accounts"  of  the  Metropolitan  in  New 
York  form  the  most  mysterious  and  incredible 
chapter  in  its  history.  The  Metropolitan  reports 
show  that  they  spent  anywhere  from  $500,000  to 
$600,000  a  mile  building  underground  trolley  lines 
which,  at  their  own  extravagant  estimate,  should 
have  cost  only  $150,000.  In  a  few  years  untold 
millions,  wasted  in  this  way,  disappeared  from  the 
Metropolitan  treasury.  In  1907  the  Public  Ser 
vice  Commission  of  New  York  began  investigating 
these  "construction  accounts,"  but  it  had  not  pro 
ceeded  far  when  the  discovery  was  made  that  all 
the  Metropolitan  books  containing  the  information 
desired  had  been  destroyed.  All  the  ledgers,  jour 
nals,  checks,  and  vouchers  containing  the  finan 
cial  history  of  the  Metropolitan  since  its  organi 
zation  in  1893  had  been  sold  for  $117  to  a  junk 
man,  who  had  agreed  in  writing  to  grind  them  into 
pulp,  so  that  they  would  be  safe  from  "prying 
eyes."  We  shall  therefore  never  know  precisely 
how  this  money  was  spent.  But  here  again  the 
Chicago  transactions  help  us  to  an  understanding. 
In  1898  Charles  T.  Yerkes,  with  that  cynical  frank 
ness  which  some  people  have  regarded  as  a  redeem 
ing  trait  in  his  character,  opened  his  books  for  the 


PUBLIC  UTILITIES  145 

preceding  twenty-five  years  to  the  Civic  Federa 
tion  of  Chicago.  These  books  disclosed  that  Mr. 
Yerkes  and  his  associates,  Widener  and  Elkins,  had 
made  many  millions  in  reconstructing  the  Chicago 
lines  at  prices  which  represented  gross  overcharges 
to  the  stockholders.  For  this  purpose  Yerkes,  Wide 
ner,  and  Elkins  organized  the  United  States  Con 
struction  Company  and  made  contracts  for  instal 
ling  the  new  electric  systems  on  the  lines  which 
they  controlled  by  lease  or  stock  ownership.  It 
seems  a  not  unnatural  suspicion  that  the  vanished 
Metropolitan  books  would  have  disclosed  similar 
performances  in  New  York. 

The  concluding  chapter  of  this  tragedy  has  its 
setting  in  the  Stock  Exchange.  These  inside  gentle 
men,  as  already  said,  received  no  cash  as  their  prof 
its  from  these  manipulations  —  only  stock.  But 
in  the  eyes  of  the  public  this  stock  represented  an 
enormous  value.  Metropolitan  securities,  for  ex 
ample,  represented  the  control  and  ownership  of 
all  the  surface  transit  business  in  the  city  of  New 
York.  Naturally,  it  had  a  great  investment  value. 
When  it  began  to  pay  regularly  seven  per  cent  divi 
dends,  the  public  appetite  for  Metropolitan  became 
insatiable.  The  eager  purchasers  did  not  know, 
what  we  know  now,  that  the  Metropolitan  did  not 


146          THE  AGE  OF  BIG  BUSINESS 

earn  these  dividends  and  never  could  have  earned 
them.  The  mere  fact  that  it  was  paying,  as  rentals 
on  its  leased  lines,  annual  sums  far  in  excess  of  their 
earning  capacity,  necessarily  prevented  anything 
in  the  nature  of  profitable  operation.  The  un 
pleasant  fact  is  that  these  dividends  were  paid  with 
borrowed  money  merely  to  make  the  stock  market 
able.  It  is  not  unlikely  that  the  padded  construc 
tion  accounts,  already  described,  may  have  con 
cealed  large  disbursements  of  money  for  unearned 
dividends.  When  the  Metropolitan  was  listed  in 
1897,  it  immediately  went  beyond  par.  The  excite 
ment  that  followed  forms  one  of  the  most  memor 
able  chapters  in  the  history  of  Wall  Street.  The 
investing  public,  egged  on  by  daring  and  skillful 
stock  manipulators,  simply  went  mad  and  purchased 
not  only  Metropolitan  but  street  railway  shares 
that  were  then  even  more  speculative.  It  was  in 
these  bubble  days  that  Brooklyn  Rapid  Transit 
soared  to  heights  from  which  it  subsequently 
descended  precipitately.  Under  this  stimulus, 
Metropolitan  stock  ultimately  sold  at  $269  a 
share.  While  the  whole  investing  public  was  scram 
bling  for  Metropolitan,  the  members  of  the  ex 
ploiting  syndicate  found  ample  opportunity  to  sell. 
The  real  situation  became  apparent  when  William 


PUBLIC  UTILITIES  147 

C.  Whitney  died  in  1904  leaving  an  estate  valued  at 
$40,000,000.  Not  a  single  share  of  Metropolitan 
was  found  among  his  assets !  The  final  crash  came 
in  1907,  when  the  Metropolitan,  a  wrecked  and 
plundered  shell,  confessed  insolvency  and  went  in 
to  a  receivership.  Those  who  had  purchased  its 
stock  found  their  holdings  as  worthless  as  the  tradi 
tional  western  gold  mine.  The  story  of  the  Chicago 
and  Philadelphia  systems,  as  well  as  that  of  nu 
merous  other  cities,  had  been  essentially  the  same. 
The  transit  facilities  of  millions  of  Americans  had 
merely  become  the  instruments  of  a  group  of  specu 
lators  who  had  made  huge  personal  fortunes  and  had 
left,  as  a  monument  of  their  labors,  street  railway 
lines  whose  gross  overcapitalization  was  apparent 
to  all  and  whose  physical  dilapidation  in  many 
cases  revealed  the  character  of  their  management. 
It  seems  perhaps  an  exaggeration  to  say  that  the 
enterprises  which  have  resulted  in  equipping  our 
American  cities  and  suburbs  with  trolley  lines  and 
electric  lighting  facilities  have  followed  the  plan 
of  campaign  sketched  above.  Perhaps  not  all 
have  repeated  the  worst  excesses  of  the  syndicate 
that  so  remorselessly  exploited  New  York,  Chicago, 
and  Philadelphia.  Yet  in  most  cases  these  elabo 
rate  undertakings  have  been  largely  speculative  in 


148  THE  AGE  OF  BIG  BUSINESS 

character.  Huge  issues  of  fictitious  stock,  created 
purely  for  the  benefit  of  inner  rings,  have  been  al 
most  the  prevailing  rule.  Stock  speculation  and 
municipal  corruption  have  constantly  gone  hand 
in  hand  everywhere  with  the  development  of  the 
public  utilities.  The  relation  of  franchise  corpora 
tions  to  municipalities  is  probably  the  thing  which 
has  chiefly  opened  the  eyes  of  Americans  to  certain 
glaring  defects  in  their  democratic  organization. 
The  popular  agitation  which  has  resulted  has  led 
to  great  political  reforms.  The  one  satisfaction 
which  we  can  derive  from  such  a  relation  as  that 
given  above  is  that,  after  all,  it  is  representative  of 
a  past  era  in  our  political  and  economic  life.  No 
new  "Metropolitan  syndicate"  can  ever  repeat  the 
operations  of  its  predecessors.  Practically  every 
State  now  has  utility  commissions  which  regulate 
the  granting  of  franchises,  the  issue  of  securities, 
the  details  of  construction  and  equipment  and 
service.  An  awakened  public  conscience  has  ef 
fectively  ended  the  alliance  between  politics  and 
franchise  .corporations  and  the  type  of  syndicate 
described  in  the  foregoing  pages  belongs  as  much 
to  our  American  past  as  that  rude  frontier  civiliza 
tion  with  which,  after  all,  it.  had  many  charac 
teristics  in  common. 


CHAPTER  VI 


MAKING  THE  WORLD'S  AGRICULTURAL  MACHINERY 


THE  Civil  War  in  America  did  more  than  free  the 
negro  slave :  it  freed  the  white  man  as  well.  In  the 
Civil  War  agriculture,  for  the  first  time  in  history, 
ceased  to  be  exclusively  a  manual  art.  Up  to  that 
time  the  typical  agricultural  laborer  had  been  a 
bent  figure,  tending  his  fields  and  garnering  his 
crops  with  his  own  hands.  Before  the  war  had 
ended  the  American  farmer  had  assumed  an  erect 
position;  the  sickle  and  the  scythe  had  given  way 
to  a  strange  red  chariot,  which,  with  practically  no 
expenditure  of  human  labor,  easily  did  the  work 
of  a  dozen  men.  Many  as  have  been  America's 
contributions  to  civilization,  hardly  any  have  ex 
erted  greater  influence  in  promoting  human  welfare 
than  her  gift  of  agricultural  machinery.  It  seems 
astounding  that,  until  McCormick  invented  his 
reaper,  in  1831,  agricultural  methods,  in  both  the 
New  and  the  Old  World,  differed  little  from  those 

149 


150  THE  AGE  OF  BIG  BUSINESS 

that  had  prevailed  in  the  days  of  the  Babylonians. 
The  New  England  farmer  sowed  his  fields  and 
reaped  his  crops  with  almost  identically  the  same 
instruments  as  those  which  had  been  used  by  the 
Roman  farmer  in  the  time  of  the  Gracchi.  Only 
a  comparatively  few  used  the  scythe;  the  great 
majority,  with  crooked  backs  and  bended  knees, 
cut  the  grain  with  little  hand  sickles  precisely  like 
those  which  are  now  dug  up  in  Etruscan  and  Egyp 
tian  tombs. 

Though  McCormick  had  invented  his  reaper  in 
1831,  and  though  many  rival  machines  had  ap 
peared  in  the  twenty  years  preceding  the  Civil  War, 
only  the  farmers  on  the  great  western  plains  had 
used  the  new  machinery  to  any  considerable  extent. 
The  agricultural  papers  and  agricultural  fairs  had 
not  succeeded  in  popularizing  these  great  labor- 
saving  devices.  Labor  was  so  abundant  and  so 
cheap  that  the  farmer  had  no  need  of  them.  But 
the  Civil  War  took  one  man  in  three  for  the  armies, 
and  it  was  under  this  pressure  that  the  farmers 
really  discovered  the  value  of  machinery.  A  small 
boy  or  girl  could  mount  a  McCormick  reaper  and 
cut  a  dozen  acres  of  grain  in  a  day.  This  circum 
stance  made  it  possible  to  place  millions  of  soldiers 
in  the  field  and  to  feed  the  armies  from  farms  on 


AGRICULTURAL  MACHINERY         151 

which  mature  men  did  very  little  work.  But  the 
reaper  promoted  the  Northern  cause  in  other  ways. 
Its  use  extended  so  in  the  early  years  of  the  war 
that  the  products  of  the  farms  increased  on  an  enor 
mous  scale,  and  the  surplus,  exported  to  Europe, 
furnished  the  liquid  capital  that  made  possible  the 
financing  of  the  war.  Europe  gazed  in  astonish 
ment  at  a  new  spectacle  in  history;  that  of  a 
nation  fighting  the  greatest  war  which  had  been 
known  up  to  that  time,  employing  the  greater  part 
of  her  young  and  vigorous  men  in  the  armies,  and 
yet  growing  infinitely  richer  in  the  process.  The 
Civil  War  produced  many  new  implements  of  war 
fare,  such  as  the  machine  gun  and  the  revolving 
turret  for  battleships,  but,  so  far  as  determining 
the  result  was  concerned,  perhaps  the  most  im 
portant  was  the  reaper. 

Extensive  as  the  use  of  agricultural  machinery 
became  in  the  Civil  War,  that  period  only  faintly 
foreshadowed  the  development  that  has  taken  place 
since.  The  American  farm  is  today  like  a  huge 
factory;  the  use  of  the  hands  has  almost  entirely 
disappeared;  there  are  only  a  few  operations  of 
husbandry  that  are  not  performed  automatically. 
In  Civil  War  days  the  reaper  merely  cut  the  grain; 
now  machinery  rakes  it  up  and  binds  it  into  sheaves 


152  THE  AGE  OF  BIG  BUSINESS 

and  threshes  it.  Similar  mechanisms  bind  corn  and 
rice.  Machinery  is  now  used  to  plant  potatoes; 
grain,  cotton,  and  other  farm  products  are  sown 
automatically.  The  husking  bees  that  formed  one 
of  our  social  diversions  in  Civil  War  days  have 
disappeared,  for  particular  machines  now  rip  the 
husks  off  the  ears.  Horse  hay-forks  and  horse  hay- 
rakes  have  supplanted  manual  labor.  The  mere 
names  of  scores  of  modern  instruments  of  farming, 
all  unknown  in  Civil  War  days  —  hay  carriers,  hay 
loaders,  hay  stackers,  manure  spreaders,  horse  corn 
planters,  corn  drills,  disk  harrows,  disk  ploughs, 
steam  ploughs,  tractors,  and  the  like  —  give  some 
suggestion  of  the  extent  to  which  America  has 
made  mechanical  the  most  ancient  of  occupations. 
In  thus  transforming  agriculture,  we  have  de 
veloped  not  only  our  own  Western  plains,  but 
we  have  created  new  countries.  Argentina  could 
hardly  exist  today  except  for  American  agricultural 
machinery.  Ex-President  Loubet  declared,  a  few 
years  ago,  that  France  would  starve  to  death  ex 
cept  for  the  farming  machines  that  were  turned  out 
in  Chicago.  There  is  practically  no  part  of  the 
world  where  our  self-binders  are  not  used.  In 
many  places  America  is  not  known  as  the  land  of 
freedom  and  opportunity,  but  merely  as  "the  place 


AGRICULTURAL  MACHINERY         153 

from  which  the  reapers  come. "  The  traveler  sud 
denly  comes  upon  these  familiar  agents  in  every 
European  country,  in  South  America,  in  Egypt, 
China,  Algiers,  Siberia,  India,  Burma,  and  Aus 
tralia.  For  agricultural  machinery  remains  today, 
what  it  has  always  been,  almost  exclusively  an 
American  manufacture.  It  is  practically  the  only 
native  American  product  that  our  European  com 
petitors  have  not  been  able  to  imitate.  Tariff 
walls,  bounty  systems,  and  all  the  other  Artificial 
aids  to  manufacturing  have  not  developed  this 
industry  in  foreign  lands,  and  today  the  United 
States  produces  four-fifths  of  all  the  agricultural 
machinery  used  in  the  world.  The  International 
Harvester  Company  has  its  salesmen  in  more  than 
fifty  countries,  and  has  established  large  American 
factories  in  many  nations  of  Europe. 

One  day,  a  few  years  before  his  death,  Prince 
Bismarck  was  driving  on  his  estate,  closely  follow 
ing  a  self-binder  that  had  recently  been  put  to 
work.  The  venerable  statesman,  bent  and  feeble, 
seemed  to  find  a  deep  melancholy  interest  in  the 
operation. 

"Show  me  the  thing  that  ties  the  knot, "  he  said. 
It  was  taken  to  pieces  and  explained  to  him  in 
detail. 


154          THE  AGE  OF  BIG  BUSINESS 

"Can  these  machines  be  made  in  Germany?"  he 
asked. 

"No,  your  Excellency, "  came  the  reply.  "They 
can  be  made  only  in  America. " 

The  old  man  gave  a  sigh.  "Those  Yankees  are 
ingenious  fellows,"  he  said.  "This  is  a  wonderful 
machine. " 

In  this  story  of  American  success,  four  names 
stand  out  preeminently.  The  men  who  made  the 
greatest;  contributions  were  Cyrus  H.  McCormick, 
C.  W.  Marsh,  Charles  B.  Withington,  and  John 
F.  Appleby.  The  name  that  stands  foremost,  of 
course,  is  that  of  McCormick,  but  each  of  the  others 
made  additions  to  his  invention  that  have  pro 
duced  the  present  finished  machine.  It  seems  like 
the  stroke  of  an  ironical  fate  which  decreed  that 
since  it  was  the  invention  of  a  Northerner,  Eli 
Whitney,  that  made  inevitable  the  Civil  War,  so  it 
was  the  invention  of  a  Southerner,  Cyrus  McCor 
mick,  that  made  inevitable  the  ending  of  that  war 
in  favor  of  the  North. 

McCormick  was  born  in  Rockbridge  County, 
Virginia,  on  a  farm  about  eighteen  miles  from 
Staunton.  He  was  a  child  of  that  pioneering 
Scotch-Irish  race  which  contributed  so  greatly  to 
the  settlement  of  this  region  and  which  afterward 


McCORMICK'S  FIRST  REAPING  MACHINE 


Wood  engraving  in  Mechanic's  Magazine  and  Register  of  Inventions  and 
Improvements,  October,  1834. 


CYRUS  H.  McCORMICK 
Daguerreotype  taken  about  1839. 


THE  AGE  OP  BIG  BUS; 

"Can  these  machines  be  made  in  Germany?"  he 

• 

"No,  your  Excellency,*'  came  the  reply.  "They 
can  be  made  only  in  America. " 

The  old  man  gave  a  sigh.  "Those  Yankees  are 
ingenious  fellows, "  he  said.  "This  is  a  wonderful 
machine. M 

In  tlSWfc>L\i.  ^vAX^i^^m^PWWfH^^^anies 
standout  pree'i. 

bftouKMUwinv  \<>  vyfoj^'tfi  \>\\v>  *M-  •  ^or/Bi^lre  BOOT* 

greates^  contrihrtgP^tffflbfi-dUBywwiH.  McCormick, 

V.  Marsh,  Charles  B.  Withington,  and  John 

F.  Appteby.     The  name  that  stands  foremost,  of 

aiek,  but  each  of  the  others 
on  that  have  pro- 

-  iMTRMttt  finished  machine.     It  seems  like 

iitek  decreed  that 
ier,  Eli 

Whi«-  ar,soit 

was  the  mv«fitxKi  of  a  Southerner,  Cyrus  McCor 
mick,  that  made  inevitable  the  ending  of  that  war 
in  favor  of  the  North. 

McCormick  was  born  in  Rockbridge  County, 
Virginia,  on  a  farm  about  eighteen  miles  from 
Staunton.  He  ^MfflPOil*  ?>TOat  pioneering 
Scotch-Irish  rdfcfci  ^Wel!«Mffi^?I^9a93  greatly  to 
the  settlement  of  this  region  and  which  afterward 


AGRICULTURAL  MACHINERY         155 

made  such  inestimable  additions  to  American  citi 
zenship.  The  country  in  which  he  grew  up  was 
rough  and,  so  far  as  the  conventionalities  go,  un 
civilized;  the  family  homestead  was  little  more 
than  a  log  cabin;  and  existence  meant  a  continual 
struggle  with  a  not  particularly  fruitful  soil.  The 
most  remarkable  figure  in  the  McCormick  home 
circle,  and  the  one  whose  every-day  life  exerted  the 
greatest  influence  on  the  boy,  was  his  father.  The 
older  McCormick  had  one  obsessing  idea  that  made 
him  the  favorite  butt  of  the  local  humorists.  He 
believed  that  the  labor  spent  in  reaping  grain  was 
a  useless  expenditure  of  human  effort  and  that 
machinery  might  be  made  to  do  the  work.  Other 
men,  in  this  country  and  in  Europe,  had  nourished 
similar  notions.  Several  Englishmen  had  invented 
reaping  machines,  all  of  which  had  had  only  a  single 
defect  —  they  would  not  reap.  An  ingenious  Eng 
lish  actor  had  developed  a  contrivance  which  would 
cut  imitation  wheat  on  the  stage,  but  no  one  had 
developed  a  machine  that  would  work  satisfac 
torily  in  real  life.  Robert  McCormick  spent  the 
larger  part  of  his  days  and  nights  tinkering  at  a 
practical  machine.  He  finally  produced  a  horrific 
contrivance,  made  up  of  whirling  sickles,  knives, 
and  revolving  rods,  pushed  from  behind  by  two 


156  THE  AGE  OF  BIG  BUSINESS 

horses;   when  he   tried   this  upon  a  grain-field, 
however,  it  made  a  humiliating  failure. 

Evidently  Robert  McCormick  had  ambitions 
far  beyond  his  powers;  yet  without  his  absurd 
experiments  the  development  of  American  agricul 
ture  might  have  waited  many  years.  They  became 
the  favorite  topics  of  conversation  in  the  evening 
gatherings  that  took  place  about  the  family  log 
fire.  Robert  McCormick  had  several  sons,  and  one 
manifested  a  particular  interest  in  his  repeated 
failures.  From  the  time  he  was  seven  years  old 
Cyrus  Hall  McCormick  became  his  father's  closest 
companion.  Others  might  ridicule  and  revile,  but 
this  chubby,  bright-eyed,  intelligent  little  boy  was 
always  the  keenest  listener,  the  one  comfort  which 
the  father  had  against  his  jeering  neighbors.  He 
also  became  his  father's  constant  associate  in  his 
rough  workshop.  Soon,  however,  the  older  man 
noticed  a  change  in  their  relations.  The  boy  was 
becoming  the  teacher,  and  the  father  was  taught. 
By  the  time  Cyrus  was  eighteen,  indeed,  he  had 
advanced  so  far  beyond  his  father  that  the  lat 
ter  had  become  merely  a  proud  observer.  Young 
McCormick  threw  into  the  discard  all  his  father's 
ideas  and  struck  out  on  entirely  new  lines.  By  the 
time  he  had  reached  his  twenty-second  birthday  he 


AGRICULTURAL  MACHINERY         157 

had  constructed  a  machine  which,  in  all  its  essen 
tial  details,  is  the  one  which  we  have  today.  He 
had  introduced  seven  principles,  all  of  which  are 
an  indispensable  part  of  every  reaper  constructed 
now.  One  afternoon  he  drove  his  unlovely  con 
traption  upon  his  father's  farm,  with  no  witnesses 
except  his  own  family.  This  group  now  witnessed 
the  first  successful  attempt  ever  made  to  reap  with 
machinery.  A  few  days  later  young  McCormick 
gave  a  public  exhibition  at  Steele's  Tavern,  cutting 
six  acres  of  oats  in  an  afternoon.  The  popular 
ridicule  soon  changed  into  acclaim;  the  new  inven 
tion  was  exhibited  in  a  public  square  and  Cyrus 
McCormick  became  a  local  celebrity.  Perhaps  the 
words  that  pleased  him  most,  however,  were  those 
spoken  by  his  father.  "  I  am  proud, "  said  the  old 
man,  "to  have  a  son  who  can  do  what  I  failed  to 
do." 

This  McCormick  reaper  dates  from  1831;  but  it 
represented  merely  the  beginnings  of  the  modern 
machine.  It  performed  only  a  single  function;  it 
simply  cut  the  crop.  When  its  sliding  blade  had 
performed  this  task,  the  grain  fell  back  upon  a  plat 
form,  and  a  farm  hand,  walking  alongside,  raked 
this  off  upon  the  ground.  A  number  of  human  har 
vesters  followed,  picked  up  the  bundles,  and  tied  a 


158  THE  AGE  OF  BIG  BUSINESS 

few  strips  of  grain  around  them,  making  the  sheaf. 
The  work  was  exceedingly  wearying  and  particu 
larly  hard  upon  the  women  who  were  frequently 
impressed  into  service  as  farm-hands.  About  1858 
two  farmers  named  Marsh,  who  lived  near  De 
Kalb,  Illinois,  solved  this  prohlem.  They  at 
tached  to  their  McCormick  reaper  a  moving  plat 
form  upon  which  the  cut  grain  was  deposited.  A 
footboard  was  fixed  to  the  machine  upon  which 
two  men  stood.  As  the  grain  came  upon  this 
moving  platform  these  men  seized  it,  bound  it  into 
sheaves,  and  threw  it  upon  the  field.  Simple  as  this 
procedure  seemed  it  really  worked  a  revolution  in 
agriculture;  for  the  first  time  since  the  pronounce 
ment  of  the  primal  curse,  the  farmer  abandoned 
his  hunchback  attitude  and  did  his  work  standing 
erect.  Yet  this  device  also  had  its  disqualifications, 
the  chief  one  being  that  it  converted  the  human 
sheaf-binder  into  a  sweat-shop  worker.  It  was 
necessary  to  bind  the  grain  as  rapidly  as  the  plat 
form  brought  it  up;  the  worker  was  therefore  kept 
in  constant  motion;  and  the  consequences  were  fre 
quently  distressing  and  nerve  racking.  Yet  this 
"Marsh  Harvester"  remained  the  great  favorite 
with  farmers  from  about  1860  to  1874. 
All  this  time,  however,  there  was  a  growing 


AGRICULTURAL  MACHINERY         159 

feeling  that  even  the  Marsh  harvester  did  not  re 
present  the  final  solution  of  the  problem;  the  air 
was  full  of  talk  and  prophecies  about  self-binders, 
something  that  would  take  the  loose  wheat  from 
the  platform  and  transform  it  into  sheaves.  Hun 
dreds  of  attempts  failed  until,  in  1874,  Charles  B. 
Withington  of  Janesville,  Wisconsin,  brought  to 
McCormick  a  mechanism  composed  of  two  steel 
arms  which  seized  the  grain,  twisted  a  wire  around 
it,  cut  the  wire,  and  tossed  the  completed  sheaf 
to  the  earth.  In  actual  practice  this  contrivance 
worked  with  the  utmost  precision.  Finally  Amer 
ican  farmers  had  a  machine  that  cut  the  grain, 
raked  it  up,  and  bound  it  into  sheaves  ready  for 
the  mill.  Human  labor  had  apparently  lost  its  use 
fulness;  a  solitary  man  or  woman,  perched  upon  a 
seat  and  driving  a  pair  of  horses,  now  performed 
all  these  operations  of  husbandry. 

By  this  time,  scores  of  manufacturers  had  en 
tered  the  field  in  opposition  to  McCormick,  but  his 
acquisition  of  Withington's  invention  had  appar 
ently  made  his  position  secure.  Indeed,  for  the 
next  ten  years  he  had  everything  his  own  way. 
Then  suddenly  an  ex-keeper  of  a  dry-goods  store  in 
Maine  crossed  his  path.  This  was  William  Deer- 
ing,  a  character  quite  as  energetic,  forceful,  and 


160  THE  AGE  OF  BIG  BUSINESS 

pugnacious  as  was  McCormick  himself.  Though 
McCormick  had  made  and  sold  thousands  of  his 
self-binders,  farmers  were  already  showing  signs 
of  discontent.  The  wire  proved  a  continual  an 
noyance.  It  mingled  with  the  straw  and  killed 
the  cattle  —  at  least  so  the  farmers  complained;  it 
cut  their  hands  and  even  found  its  way,  with  dis 
astrous  results,  into  the  flour  mills.  Deering  now 
appeared  as  the  owner  of  a  startling  invention  by 
John  F.  Appleby.  This  did  all  that  the  Withing- 
ton  machine  did  and  did  it  better  and  quicker; 
and  it  had  the  great  advantage  that  it  bound  with 
twine  instead  of  wire.  The  new  machine  imme 
diately  swept  aside  all  competitors;  McCormick, 
to  save  his  reaper  from  disaster,  presently  per 
fected  a  twine  binder  of  his  own.  The  appearance 
of  Appleby's  improvement  in  1884  completes  the 
cycle  of  the  McCormick  reaper  on  its  mechanical 
side  The  harvesting  machine  of  fifty  nations  to 
day  is  the  one  to  which  Appleby  put  the  final 
touches  in  1884.  Since  then  nothing  of  any  great 
importance  has  been  added. 

This  outline  of  invention,  however,  comprises 
only  part  of  the  story.  The  development  of  the 
reaper  business  presents  a  narrative  quite  as  ad 
venturous  as  that  of  the  reaper  itself.  Cyrus 


AGRICULTURAL  MACHINERY         161 

McCormick  was  not  only  a  great  inventor;  he  was 
also  a  great  business  man.  So  great  was  his  ability 
in  this  direction,  indeed,  that  there  has  been  a  tend 
ency  to  discredit  his  achievements  as  a  creative  gen 
ius  and  to  attribute  his  success  to  his  talents  as  an 
organizer  and  driver  of  industry.  "I  may  make  a 
million  dollars  from  this  reaper, "  said  McCormick, 
in  the  full  tide  of  enthusiasm  over  his  invention; 
and  these  words  indicate  an  indispensable  part  of 
his  program.  He  had  no  miserly  instinct  but  he 
had  one  overpowering  ambition.  It  was  McCor- 
mick's  conviction,  almost  religious  in  its  fervor, 
that  the  harvester  business  of  the  world  belonged 
to  him.  As  already  indicated,  plenty  of  other  hardy 
spirits,  many  of  them  almost  as  commanding  per 
sonalities  as  himself,  disputed  the  empire.  Not 
far  from  12,000  patents  on  harvesting  machines 
were  granted  in  this  country  in  the  fifty  years  fol 
lowing  McCormick's  invention,  and  more  than  two 
hundred  companies  were  formed  to  compete  for  the 
market.  McCormick  always  regarded  these  com 
petitors  as  highwaymen  who  had  invaded  a  field 
which  had  been  almost  divinely  set  apart  for  him 
self.  A  man  of  covenanting  antecedents,  heroic 
in  his  physical  proportions,  with  a  massive,  Jove- 
like  head  and  beard,  tirelessly  devoted  to  his  work, 


162          THE  AGE  OF  BIG  BUSINESS 

watching  every  detail  with  a  microscopic  eye,  mar 
shaling  a  huge  force  of  workers  who  were  as  pos 
sessed  by  this  one  overruling  idea  as  was  Mc- 
Cormick  himself,  he  certainly  presented  an  almost 
unassailable  battlefront  to  his  antagonists. 

The  competition  that  raged  between  McCormick 
and  the  makers  of  rival  machines  was  probably 
the  fiercest  that  has  prevailed  in  any  American 
industry.  For  marketing  his  machine  McCor 
mick  developed  a  system  almost  as  ingenious  as 
the  machine  itself.  The  popularization  of  so  un 
gainly  and  expensive  a  contrivance  as  the  harves 
ter  proved  a  slow  and  difficult  task.  McCormick  at 
first  attempted  to  build  his  product  on  his  Virginia 
farm  and  for  many  years  it  was  known  as  the  Vir 
ginia  Reaper.  Nearly  ten  years  passed,  however, 
before  he  sold  his  first  machine.  The  farmer  first 
refused  to  take  it  seriously.  "It's  a  great  inven 
tion,  "  he  would  say,  "but  I'm  running  a  farm,  not 
a  circus."  About  1847  McCormick  decided  that 
the  Western  prairies  offered  the  finest  field  for  its 
activities,  and  established  his  factory  at  Chicago, 
then  an  ugly  little  town  on  the  borders  of  a  swamp. 
This  selection  proved  to  be  a  stroke  of  genius,  for 
it  placed  the  harvesting  factory  right  at  the  door 
of  its  largest  market. 


AGRICULTURAL  MACHINERY         163 

The  price  of  the  harvester,  however,  seemed 
an  insurmountable  obstacle  to  its  extensive  use. 
The  early  settlers  of  the  Western  plains  had  little 
more  than  their  brawny  hands  as  capital,  and  the 
homestead  law  furnished  them  their  land  practi 
cally  free.  In  the  eyes  of  a  large-seeing  pioneer 
like  McCormick  this  was  capital  enough.  He  de 
termined  that  his  reaper  should  develop  this  ex 
tensive  domain,  and  that  the  crops  themselves 
should  pay  the  cost.  Selling  expensive  articles  on 
the  installment  plan  now  seems  a  commonplace 
of  business,  but  in  those  days  it  was  practically 
unknown.  McCormick  was  the  first  to  see  its 
possibilities.  He  established  an  agent,  usually 
the  general  storekeeper,  in  every  agricultural  cen 
ter.  Any  farmer  who  had  a  modicum  of  cash 
and  who  bore  a  reputation  for  thrift  and  honesty 
could  purchase  a  reaper.  In  payment  he  gave  a 
series  of  notes,  so  timed  that  they  fell  due  at  the 
end  of  harvesting  seasons.  Thus,  as  the  money 
came  in  from  successive  harvests,  the  pioneer  paid 
off  the  notes,  taking  two,  three,  or  four  years  in  the 
process.  In  the  sixties  and  seventies  immigrants 
from  the  Eastern  States  and  from  Europe  poured 
into  the  Mississippi  Valley  by  the  hundreds  of 
thousands.  Almost  the  first  person  who  greeted 


' 

164  THE  AGE  OF  BIG  BUSINESS 

the  astonished  Dane,  German,  or  Swede  was  an 
agent  of  the  harvester  company,  offering  to  let  him 
have  one  of  these  strange  machines  on  these  terms. 
Thus  the  harvester,  under  McCormick's  compre 
hensive  selling  plans,  did  as  much  as  the  homestead 
act  in  opening  up  this  great  farming  region. 

McCormick  covered  the  whole  agricultural 
United  States  with  these  agents.  In  this  his  nu 
merous  competitors  followed  suit,  and  the  live 
liest  times  ensued.  From  that  day  to  this  the 
agents  of  harvesting  implements  have  lent  much 
animation  and  color  to  rural  life  in  this  country. 
Half  a  dozen  men  were  usually  tugging  away  at 
one  farmer  at  the  same  time.  The  mere  fact  that 
the  farmer  had  closed  a  contract  did  not  end  his 
troubles,  for  "busting  up  competitors'  sales"  was 
part  of  the  agent's  business.  The  situation  fre 
quently  reached  a  point  where  there  was  only  one 
way  to  settle  rival  claims  and  that  was  by  a  field 
contest.  At  a  stated  time  two  or  three  or  four 
rival  harvesters  would  suddenly  appear  on  the 
farmer's  soil,  each  prepared  to  show,  by  actual 
test,  its  superiority  over  the  enemy.  Farmers  and 
idlers  for  miles  around  would  gather  to  witness 
the  Homeric  struggle.  At  a  given  signal  the  small 
army  of  machines  would  spring  savagely  at  a  field 


AGRICULTURAL  MACHINERY         165 

of  wheat.  The  one  that  could  cut  the  allotted  area 
in  the  shortest  time  was  regarded  as  the  winner. 
The  harvester  would  rush  on  all  kinds  of  fields, 
flat  and  hilly,  dry  and  wet,  and  would  cut  all  kinds 
of  crops,  and  even  stubble.  All  manner  of  tests 
were  devised  to  prove  one  machine  stronger  than 
its  rival;  a  favorite  idea  was  to  chain  two  back  to 
back,  and  have  them  pulled  apart  by  frantic  career 
ing  horses;  the  one  that  suffered  the  fewest  break 
downs  would  be  generally  acclaimed  from  town  to 
town.  Sometimes  these  field  tests  were  the  most 
exciting  and  spectacular  events  at  country  fairs. 

Thus  the  harvesting  machine  "pushed  the  fron 
tier  westward  at  the  rate  of  thirty  miles  a  year," 
according  to  William  H.  Seward.  It  made  Amer 
ican  and  Canadian  agriculture  the  most  efficient 
in  the  world.  The  German  brags  that  his  agricul 
ture  is  superior  to  American,  quoting  as  proof  the 
more  bushels  of  wheat  or  potatoes  he  grows  to  an 
acre.  But  the  comparison  is  fallacious.  The  real 
test  of  efficiency  is,  not  the  crops  that  are  grown 
per  acre,  but  the  crops  that  are  grown  per  man  em 
ployed.  German  efficiency  gets  its  results  by  im 
pressing  women  as  cultivators  —  depressing  bent 
figures  that  are  in  themselves  a  sufficient  criticism 
upon  any  civilization.  America  gets  its  results 


166  THE  AGE  OF  BIG  BUSINESS 

by  using  a  minimum  of  human  labor  and  letting  ma 
chinery  do  the  work.  Thus  America's  methods  are 
superior  not  only  from  the  standpoint  of  economics 
but  of  social  progress.  All  nations,  including  Ger 
many,  use  our  machinery,  but  none  to  the  extent 
that  prevails  on  the  North  American  Continent. 

Perhaps  McCormick's  greatest  achievement  is 
that  his  machine  has  banished  famine  wherever 
it  is  extensively  used,  at  least  in  peace  tunes.  Be 
fore  the  reaper  appeared  existence,  even  in  the 
United  States,  was  primarily  a  primitive  struggle 
for  bread.  The  greatest  service  of  the  harvester 
has  been  that  it  has  freed  the  world  —  unless 
it  is  a  world  distracted  by  disintegrating  war  — 
from  a  constant  anxiety  concerning  its  food  supply. 
The  hundreds  of  thousands  of  binders,  active  in 
the  fields  of  every  country,  have  made  it  certain 
that  humankind  shall  not  want  for  its  daily  bread. 
When  McCormick  exhibited  his  harvester  at  the 
London  Exposition  of  1851,  the  London  Times  ridi 
culed  it  as  "a  cross  between  an  Astley  chariot,  a 
wheel  barrow,  and  a  flying  machine."  Yet  this 
same  grotesque  object,  widely  used  in  Canada, 
Argentina,  Australia,  South  Africa,  and  India, 
becomes  an  engine  that  really  holds  the  British 
Empire  together. 


AGRICULTURAL  MACHINERY         167 

For  the  forty  years  succeeding  the  Civil  War  the 
manufacture  of  harvesting  machinery  was  a  busi 
ness  in  which  many  engaged,  but  in  which  few 
survived.  The  wildest  competition  ruthlessly  de 
stroyed  all  but  half  a  dozen  powerful  firms.  Cyrus 
McCormick  died  in  1884,  but  his  sons  proved 
worthy  successors;  the  McCormick  factory  still 
headed  the  list,  manufacturing,  in  1900,  one- third 
of  all  the  self-binders  used  in  the  world.  The  Wil 
liam  Deering  Companv  came  next  and  then  D.  M. 
Osborne,  J.  J.  Glessner,  and  W.  H.  Jones,  estab 
lished  factories  that  made  existence  exceedingly 
uncomfortable  for  the  pioneers.  Whatever  one 
may  think  of  the  motives  which  caused  so  many 
combinations  in  the  early  years  of  the  twentieth 
century,  there  is  no  question  that  irresistible  eco 
nomic  forces  compelled  these  great  harvester  com 
panies  to  get  together.  Quick  profits  in  the  shape 
of  watered  stock  had  nothing  to  do  with  the  for 
mation  of  the  International  Harvester  Company. 
All  the  men  who  controlled  these  enterprises  were 
individualists,  with  a  natural  loathing  for  trusts, 
combinations,  and  pools.  They  wished  for  nothing 
better  than  to  continue  fighting  the  Spartan  battle 
that  had  made  existence  such  an  exciting  pastime 
for  more  than  half  a  century.  But  the  simple  fact 


168  THE  AGE  OF  BIG  BUSINESS 

was  that  these  several  concerns  were  destroying 
one  another;  it  was  a  question  of  joining  hands, 
ending  the  competition  that  was  eating  so  deeply 
into  their  financial  resources,  or  reducing  the  whole 
business  to  chaos.  When  Mr.  George  W.  Perkins, 
of  J.  P.  Morgan  and  Company,  first  attempted  to 
combine  these  great  companies,  the  antagonisms 
which  had  been  accumulated  in  many  years  of  war 
fare  constantly  threatened  to  defeat  his  end.  He 
early  discovered  that  the  only  way  to  bring  these 
men  together  was  to  keep  them  apart.  The  usual 
way  of  creating  such  combinations  is  to  collect  the 
representative  leaders,  place  them  around  a  table, 
and  persuade  them  to  talk  the  thing  over.  Such 
an  amicable  situation,  however,  was  impossible 
in  the  present  instance.  Even  when  the  four  big 
men — McConnick,  Deering,  Glessner,  and  Jones — 
were  finally  brought  for  the  final  treaty  of  peace 
to  J.  P.  Morgan's  office,  Mr.  Perkins  had  to  station 
them  in  four  separate  rooms  and  flit  from  one 
to  another  arranging  terms.  Had  these  four  men 
been  brought  face  to  face,  the  Harvester  Company 
would  probably  never  have  been  formed. 

Having  once  signed  their  names,  however,  these 
once  antagonistic  interests  had  little  difficulty  in 
forming  a  strong  combination.  The  company  thus 


AGRICULTURAL  MACHINERY         169 

brought  together  manufactured  85  per  cent  of 
all  the  farm  machinery  used  in  this  country.  It 
owned  its  own  coal-fields  and  iron  mines  and  its 
own  forests,  and  it  produces  most  of  the  implements 
used  by  10,000,000  farmers.  In  1847  Cyrus  McCor- 
mick  made  100  reapers  and  sold  them  for  $10,000; 
by  1902  the  annual  production  of  the  corporation 
amounted  to  hundreds  of  thousands  of  harvesters 
—  besides  an  almost  endless  assortment  of  other 
agricultural  tools,  ploughs,  drills,  rakes,  gasoline 
engines,  tractors,  threshers,  cream  separators,  and 
the  like  —  and  the  sales  had  grown  to  about  $75,- 
000,000.  This  is  merely  the  financial  measure  of 
progress;  the  genuine  achievements  of  McCor- 
mick's  invention  are  millions  of  acres  of  pro 
ductive  land  and  a  farming  population  which  is 
without  parallel  elsewhere  for  its  prosperity,  in 
telligence,  manf  ulness,  and  general  contentment. 


CHAPTER  VII 

THE   DEMOCRATIZATION   OF   THE    AUTOMOBILE 

IN  many  manufacturing  lines,  American  genius  for 
organization  and  large  scale  production  has  devel 
oped  mammoth  industries.  In  nearly  all  the  tend 
ency  to  combination  and  concentration  has  exer 
cised  a  predominating  influence.  In  the  early  years 
of  the  twentieth  century  the  public  realized,  for  the 
first  time,  that  one  corporation,  the  American  Sugar 
Refining  Company,  controlled  ninety-eight  per  cent 
of  the  business  of  refining  sugar.  Six  large  inter 
ests  —  Armour,  Swift,  Morris,  the  National  Pack 
ing  Company,  Cudahy,  andSchwarzschild  and  Sulz- 
berger — had  so  concentrated  the  packing  business 
that,  by  1905,  they  slaughtered  practically  all  the 
cattle  shipped  to  Western  centers  and  furnished 
most  of  the  beef  consumed  in  the  large  cities 
east  of  Pittsburgh.  The  "Tobacco  Trust"  had 
largely  monopolized  both  the  wholesale  and  retail 
trade  in  this  article  of  luxury  and  had  also  made 

170 


THE  AUTOMOBILE  171 

extensive  inroads  into  the  English  market.  The 
textile  industry  had  not  only  transformed  great 
centers  of  New  England  into  an  American  Lanca 
shire,  but  the  Souther^  States,  recovering  from  the 
demoralization  of  the  Civil  War,  had  begun  to  spin 
their  own  cotton  and  to  send  the  finished  product 
to  all  parts  of  the  world.  American  shoe  manu 
facturers  had  developed  their  art  to  a  point  v/here 
"American  shoes"  had  acquired  a  distinctive  stand 
ing  in  practically  every  European  country. 

It  is  hardly  necessary  to  describe  in  detail  each 
of  these  industries.  In  their  broad  outlines  they 
merely  repeat  the  story  of  steel,  of  oil,  of  agricul 
tural  machinery;  they  are  the  product  of  the  same 
methods,  the  same  initiative.  There  is  one  branch 
of  American  manufacture,  however,  that  merits 
more  detailed  attention.  If  we  scan  the  manufac 
turing  statistics  of  1917,  one  amazing  fact  stares  us 
in  the  face.  There  are  only  three  American  indus 
tries  whose  product  has  attained  the  billion  mark; 
one  of  these  is  steel,  the  other  food  products,  while 
the  third  is  an  industry  that  was  practically  un 
known  in  the  -United  States  fifteen  years  ago. 
Superlatives  come  naturally  to  mind  in  discussing 
American  progress,  but  hardly  any  extravagant 
phrases  could  do  justice  to  the  development  of 


172          THE  AGE  OF  BIG  BUSINESS 

American  automobiles.  In  1899  the  United  States 
produced  3700  motor  vehicles;  in  1916  we  made 
1,500,000.  The  man  who  now  makes  a  personal 
profit  of  not  far  from  $50,000,000  a  year  in  this  in 
dustry  was  a  puttering  mechanic  when  the  twen 
tieth  century  came  in.  If  we  capitalized  Henry 
Ford's  income,  he  is  probably  a  richer  man  than 
Rockefeller;  yet,  as  recently  as  1905  his  possessions 
consisted  of  a  little  shed  of  a  factory  which  em 
ployed  a  dozen  workmen.  Dazzling  as  is  this  per 
sonal  success,  its  really  important  aspects  are  the 
things  for  which  it  stands.  The  American  automo 
bile  has  had  its  wild-cat  days;  for  the  larger  part, 
however,  its  leaders  have  paid  little  attention  to 
Wall  Street,  but  have  limited  their  activities  ex 
clusively  to  manufacturing.  Moreover,  the  auto 
mobile  illustrates  more  completely  than  any  other 
industry  the  technical  qualities  that  so  largely  ex 
plain  our  industrial  progress.  Above  all,  Amer 
ican  manufacturing  has  developed  three  character 
istics.  These  are  quantity  production,  standardiza 
tion,  and  the  use  of  labor-saving  machinery.  It  is 
because  Ford  and  other  manufacturers  adapted 
these  principles  to  making  the  automobile  that  the 
American  motor  industry  has  reached  such  gigantic 
proportions. 


THE  AUTOMOBILE  173 

A  few  years  ago  an  English  manufacturer,  seek 
ing  the  explanation  of  America's  ability  to  produce 
an  excellent  car  so  cheaply,  made  an  interesting 
experiment.  He  obtained  three  American  auto 
mobiles,  all  of  the  same  "standardized"  make,  and 
gave  them  a  long  and  racking  tour  over  English 
highways.  Workmen  then  took  apart  the  three 
cars  and  threw  the  disjointed  remains  into  a  pro 
miscuous  heap.  Every  bolt,  bar,  gas  tank,  motor, 
wheel,  and  tire  was  taken  from  its  accustomed 
place  and  piled  up,  a  hideous  mass  of  rubbish. 
Workmen  then  painstakingly  put  together  three 
cars  from  these  disordered  elements.  Three  chauf 
feurs  jumped  on  these  cars,  and  they  immediately 
started  down  the  road  and  made  a  long  journey 
just  as  acceptably  as  before.  The  Englishman 
had  learned  the  secret  of  American  success  with 
automobiles.  The  one  word  "standardization  " 
explained  the  mystery. 

Yet  when,  a  few  years  before,  the  English  re 
ferred  to  the  American  automobile  as  a  "glorified 
perambulator,"  the  characterization  was  not  un 
just.  This  new  method  of  transportation  was  slow 
in  finding  favor  on  our  side  of  the  Atlantic.  Amer 
ica  was  sentimentally  and  practically  devoted  to 
the  horse  as  the  motive  power  for  vehicles;  and  the 


174  THE  AGE  OF  BIG  BUSINESS 

fact  that  we  had  so  few  good  roads  also  worked 
against  the  introduction  of  the  automobile.  Yet 
here,  as  in  Europe,  the  mechanically  propelled 
wagon  made  its  appearance  in  early  times.  This 
vehicle,  like  the  bicycle,  is  not  essentially  a  modern 
invention;  the  reason  any  one  can  manufacture  it  is 
that  practically  all  the  basic  ideas  antedate  1840. 
Indeed,  the  automobile  is  really  older  than  the 
railroad.  In  the  twenties  and  thirties,  steam  stage 
coaches  made  regular  trips  between  certain  cities 
in  England  and  occasionally  a  much  resound 
ing  power-driven  carriage  would  come  careering 
through  New  York  and  Philadelphia,  scaring  all 
the  horses  and  precipitating  the  intervention  of  the 
authorities.  The  hardy  spirits  who  devised  these 
engines,  all  of  whose  names  are  recorded  in  the 
encyclopedias,  deservedly  rank  as  the  "fathers" 
of  the  automobile.  The  responsibility  as  the  actual 
"inventor"  can  probably  be  no  more  definitely 
placed.  However,  had  it  not  been  for  two  develop 
ments,  neither  of  them  immediately  related  to  the 
motor  car,  we  should  never  have  had  this  efficient 
method  of  transportation.  The  real  "fathers"  of 
the  automobile  are  Gottlieb  Daimler,  the  German 
who  made  the  first  successful  gasoline  engine,  and 
Charles  Goodyear,  the  American  who  discovered 


THE  AUTOMOBILE  175 

the  secret  of  vulcanized  rubber.  Without  this  en 
gine  to  form  the  motive  power  and  the  pneu 
matic  tire  to  give  it  four  air  cushions  to  run  on,  the 
automobile  would  never  have  progressed  beyond 
the  steam  carriage  stage.  It  is  true  that  Charles 
Baldwin  Selden,  of  Rochester,  has  been  pictured  as 
the  "inventor  of  the  modern  automobile"  because, 
as  long  ago  as  1879,  he  applied  for  a  patent  on  the 
idea  of  using  a  gasoline  engine  as  motive  power, 
securing  this  basic  patent  in  1895,  but  this,  it  must 
be  admitted,  forms  a  flimsy  basis  for  such  a  preten 
tious  claim. 

The  French  apparently  led  all  nations  in  the 
manufacture  of  motor  vehicles,  and  in  the  early 
nineties  their  products  began  to  make  occasional 
appearances  on  American  roads.  The  type  of 
American  who  owned  this  imported  machine  was 
the  same  that  owned  steam  yachts  and  a  box  at  the 
opera.  Hardly  any  new  development  has  aroused 
greater  hostility.  It  not  only  frightened  horses, 
and  so  disturbed  the  popular  traffic  of  the  time, 
but  its  speed,  its  glamour,  its  arrogance,  and  the 
haughty  behavior  of  its  proprietor,  had  apparently 
transformed  it  into  a  new  badge  of  social  cleavage. 
It  thus  immediately  took  its  place  as  a  new  gew 
gaw  of  the  rich;  that  it  had  any  other  purpose  to 


176  THE  AGE  OF  BIG  BUSINESS 

serve  had  occurred  to  few  people.  Yet  the  French 
and  English  machines  created  an  entirely  different 
reaction  in  the  mind  of  an  imaginative  mechanic 
in  Detroit.  Probably  American  annals  contain 
no  finer  story  than  that  of  this  simple  American 
workman.  Yet  from  the  beginning  it  seemed  in 
evitable  that  Henry  Ford  should  play  this  ap 
pointed  part  in  the  world.  Born  in  Michigan  in 
1863,  the  son  of  an  English  farmer  who  had  emi 
grated  to  Michigan  and  a  Dutch  mother,  Ford  had 
always  demonstrated  an  interest  in  things  far  re 
moved  from  his  farm.  Only  mechanical  devices 
interested  him.  He  liked  getting  in  the  crops, 
because  McCormick  harvesters  did  most  of  the 
work;  it  was  only  the  machinery  of  the  dairy  that 
held  him  enthralled.  He  developed  destructive 
tendencies  as  a  boy;  he  had  to  take  everything  to 
pieces.  He  horrified  a  rich  playmate  by  resolving 
his  new  watch  into  its  component  parts  —  and 
promptly  quieted  him  by  putting  it  together  again. 
"Every  clock  in  the  house  shuddered  when  it  saw 
me  coming,"  he  recently  said.  He  constructed  a 
small  working  forge  in  his  school-yard,  and  built  a 
small  steam  engine  that  could  make  ten  miles  an 
hour.  He  spent  his  winter  evenings  reading  me 
chanical  and  scientific  journals;  he  cared  little  for 


THE  AUTOMOBILE  177 

general  literature,  but  machinery  in  any  form  was 
almost  a  pathological  obsession.  Some  boys  run 
away  from  the  farm  to  join  the  circus  or  to  go  to 
sea;  Henry  Ford  at  the  age  of  sixteen  ran  away  to 
get  a  job  in  a  machine  shop.  Here  one  anomaly 
immediately  impressed  him.  No  two  machines 
were  made  exactly  alike;  each  was  regarded  as  a 
separate  job.  With  his  savings  from  his  weekly 
wage  of  $2.50,  young  Ford  purchased  a  three 
dollar  watch,  and  immediately  dissected  it.  If 
several  thousand  of  these  watches  could  be  made, 
each  one  exactly  alike,  they  would  cost  only  thirty- 
seven  cents  a  piece.  "Then, "  said  Ford  to  himself, 
"  everybody  could  have  one. "  He  had  fairly  elabo 
rated  his  plans  to  start  a  factory  on  this  basis  when 
his  father's  illness  called  him  back  to  the  farm. 

This  was  about  1880;  Ford's  next  conspicuous 
appearance  in  Detroit  was  about  1892.  This 
appearance  was  not  only  conspicuous;  it  was  ex 
ceedingly  noisy.  Detroit  now  knew  him  as  the 
pilot  of  a  queer  affair  that  whirled  and  lurched 
through  her  thoroughfares,  making  as  much  dis 
turbance  as  a  freight  train.  In  reading  his  techni 
cal  journals  Ford  had  met  many  descriptions  of 
horseless  carriages;  the  consequence  was  that  he 
had  again  broken  away  from  the  farm,  taken  a  job 


178  THE  AGE  OF  BIG  BUSINESS 

at  $45  a  month  in  a  Detroit  machine  shop,  and 
devoted  his  evenings  to  the  production  of  a  gasoline 
engine.  His  young  wife  was  exceedingly  concerned 
about  his  health;  the  neighbors'  snap  judgment  was 
that  he  was  insane.  Only  two  other  Americans, 
Charles  B.  Duryea  and  Ell  wood  Haynes,  were  at 
tempting  to  construct  an  automobile  at  that  time. 
Long  before  Ford  was  ready  with  his  machine, 
others  had  begun  to  appear.  Duryea  turned  out 
his  first  one  in  1892;  and  foreign  makes  began  to 
appear  in  considerable  numbers.  But  the  Detroit 
mechanic  had  a  more  comprehensive  inspiration. 
He  was  not  working  to  make  one  of  the  finely 
upholstered  and  beautifully  painted  vehicles  that 
came  from  overseas.  "Anything  that  isn't  good 
for  everybody  is  no  good  at  all, "  he  said.  Precisely 
as  it  was  Vail's  ambition  to  make  every  American 
a  user  of  the  telephone  and  McCormick's  to  make 
every  farmer  a  user  of  his  harvester,  so  it  was 
Ford's  determination  that  every  family  should 
have  an  automobile.  He  was  apparently  the  only 
man  in  those  times  who  saw  that  this  new  ma 
chine  was  not  primarily  a  luxury  but  a  convenience. 
Yet  all  manufacturers,  here  and  in  Europe,  laughed 
at  his  idea.  Why  not  give  every  poor  man  a 
Fifth  Avenue  house?  Frenchmen  and  Englishmen 


THE  AUTOMOBILE  179 

scouted  the  idea  that  any  one  could  make  a  cheap 
automobile.  Its  machinery  was  particularly  re 
fined  and  called  for  the  highest  grade  of  steel; 
the  clever  Americans  might  use  their  labor-saving 
devices  on  many  products,  but  only  skillful  hand 
work  could  turn  out  a  motor  car.  European  manu 
facturers  regarded  each  car  as  a  separate  prob 
lem;  they  individualized  its  manufacture  almost  as 
scrupulously  as  a  painter  paints  his  portrait  or  a 
poet  writes  his  poem.  The  result  was  that  only  a 
man  with  several  thousand  dollars  could  purchase 
one.  But  Henry  Ford — and  afterward  other  Amer 
ican  makers  —  had  quite  a  different  conception. 

Henry  Ford's  earliest  banker  was  the  proprietor 
of  a  quick-lunch  wagon  at  which  the  inventor  used 
to  eat  his  midnight  meal  after  his  hard  evening's 
work  in  the  shed.  "Coffee  Jim,"  to  whom  Ford 
confided  his  hopes  and  aspirations  on  these  occa 
sions,  was  the  only  man  with  available  cash  who 
had  any  faith  in  his  ideas.  Capital  in  more  sub 
stantial  form,  however,  came  in  about  1902.  With 
money  advanced  by  "Coffee  Jim,"  Ford  had  built 
a  machine  which  he  entered  in  the  Grosse  Point 
races  that  year.  It  was  a  hideous-looking  affair, 
but  it  ran  like  the  wind  and  outdistanced  all  com 
petitors.  From  that  day  Ford's  career  has  been 


180  THE  AGE  OF  BIG  BUSINESS 

an  uninterrupted  triumph.  But  he  rejected  the 
earliest  offers  of  capital  because  the  millionaires 
would  not  agree  to  his  terms.  They  were  look 
ing  for  high  prices  and  quick  profits,  while  Ford's 
plans  were  for  low  prices,  large  sales,  and  use 
of  profits  to  extend  the  business  and  reduce  the 
cost  of  his  machine.  Henry  Ford's  greatness  as  a 
manufacturer  consists  in  the  tenacity  with  which 
he  has  clung  to  this  conception.  Contrary  to  gen 
eral  belief  in  the  automobile  industry  he  main 
tained  that  a  high  sale  price  was  not  necessary  for 
large  profits;  indeed  he  declared  that  the  lower  the 
price,  the  larger  the  net  earnings  would  be.  Nor 
did  he  believe  that  low  wages  meant  prosperity. 
The  most  efficient  labor,  no  matter  what  the  nomi 
nal  cost  might  be,  was  the  most  economical.  The 
secret  of  success  was  the  rapid  production  of  a 
serviceable  article  in  large  quantities.  When  Ford 
first  talked  of  turning  out  10,000  automobiles  a 
year,  his  associates  asked  him  where  he  was  going 
to  sell  them.  Ford's  answer  was  that  that  was  no 
problem  at  all;  the  machines  would  sell  themselves. 
He  called  attention  to  the  fact  that  there  were 
millions  of  people  in  this  country  whose  incomes 
exceeded  $1800  a  year;  all  in  that  class  would  be 
come  prospective  purchasers  of  a  low-priced  auto- 


THE  AUTOMOBILE  f  181 

mobile.  There  were  6,000,000  farmers ;  what  more 
receptive  market  could  one  ask?  His  only  problem 
was  the  technical  one  —  how  to  produce  his  ma 
chine  in  sufficient  quantities. 

The  bicycle  business  in  this  country  had  passed 
through  a  similar  experience.  When  first  placed 
on  the  market  bicycles  were  expensive;  it  took 
$100  or  $150  to  buy  one.  In  a  few  years,  however, 
an  excellent  machine  was  selling  for  $25  or  $30. 
What  explained  this  drop  in  price?  The  answer  is 
that  the  manufacturers  learned  to  standardize  their 
product.  Bicycle  factories  became  not  so  much 
places  where  the  articles  were  manufactured  as 
assembling  rooms  for  putting  them  together.  The 
several  parts  were  made  in  different  places,  each 
establishment  specializing  in  a  particular  part;  they 
were  then  shipped  to  centers  where  they  were  trans 
formed  into  completed  machines.  The  result  was 
that  the  United  States,  despite  the  high  wages 
paid  here,  led  the  world  in  bicycle  making  and 
flooded  all  countries  with  this  utilitarian  article. 
Our  great  locomotive  factories  had  developed  on 
similar  lines.  Europeans  had  always  marveled 
that  Americans  could  build  these  costly  articles 
so  cheaply  that  they  could  undersell  European 
makers.  When  they  obtained  a  glimpse  of  an 


182          THE  AGE  OF  BIG  BUSINESS 

American  locomotive  factory,  the  reason  became 
plain.  In  Europe  each  locomotive  was  a  separate 
problem;  no  two,  even  in  the  same  shop,  were 
exactly  alike.  But  here  locomotives  are  built 
in  parts,  all  duplicates  of  one  another;  the  parts 
are  then  sent  by  machinery  to  assembling  rooms 
and  rapidly  put  together.  American  harvesting 
machines  are  built  in  the  same  way;  whenever  a 
farmer  loses  a  part,  he  can  go  to  the  country  store 
and  buy  its  duplicate,  for  the  parts  of  the  same 
machine  do  not  vary  to  the  thousandth  of  an  inch. 
The  same  principle  applies  to  hundreds  of  other 
articles. 

Thus  Henry  Ford  did  not  invent  standardization; 
he  merely  applied  this  great  American  idea  to  a 
product  to  which,  because  of  the  delicate  labor 
required,  it  seemed  at  first  unadapted.  He  soon 
found  that  it  was  cheaper  to  ship  the  parts  of  ten 
cars  to  a  central  point  than  to  ship  ten  completed 
cars.  There  would  therefore  be  large  savings  in 
making  his  parts  in  particular  factories  and  ship 
ping  them  to  assembling  establishments.  In  this 
way  the  completed  cars  would  always  be  near  their 
markets.  Large  production  would  mean  that  he 
could  purchase  his  raw  materials  at  very  low  prices; 
high  wages  meant  that  he  could  get  the  efficient 


THE  AUTOMOBILE  183 

labor  which  was  demanded  by  his  rapid  fire  method 
of  campaign.  It  was  necessary  to  plan  the  making 
of  every  part  to  the  minutest  detail,  to  have  each 
part  machined  to  its  exact  size,  and  to  have  every 
screw,  bolt,  and  bar  precisely  interchangeable. 
About  the  year  1907  the  Ford  factory  was  system 
atized  on  this  basis.  In  that  twelvemonth  it 
produced  10,000  machines,  each  one  the  absolute 
counterpart  of  the  other  9999.  American  manu 
facturers  until  then  had  been  content  with  a  few 
hundred  a  year!  From  that  date  the  Ford  pro 
duction  has  rapidly  increased;  until,  in  1916,  there 
were  nearly  4,000,000  automobiles  in  the  United 
States  —  more  than  in  all  the  rest  of  the  world  put 
together  —  of  which  one-sixth  were  the  output  of 
the  Ford  factories.  Many  other  American  manu 
facturers  followed  the  Ford  plan,  with  the  result 
that  American  automobiles  are  duplicating  the 
story  of  American  bicycles;  because  of  their  cheap 
ness  and  serviceability,  they  are  rapidly  domina 
ting  the  markets  of  the  world.  In  the  Great  War 
American  machines  have  surpassed  all  in  the  work 
done  under  particularly  exacting  circumstances. 

A  glimpse  of  a  Ford  assembling  room  —  and  we 
can  see  the  same  process  in  other  American  fac 
tories  —  makes  clear  the  reasons  for  this  success. 


184          THE  AGE  OF  BIG  BUSINESS 

In  these  rooms  no  fitting  is  done;  the  fragments  of 
automobiles  come  in  automatically  and  are  simply 
bolted  together.  First  of  all  the  units  are  assem 
bled  in  their  several  departments.  The  rear  axles, 
the  front  axles,  the  frames,  the  radiators,  and  the 
motors  are  all  put  together  with  the  same  precision 
and  exactness  that  marks  the  operation  of  the  com 
pleted  car.  Thus  the  wheels  come  from  one  part 
of  the  factory  and  are  rolled  on  an  inclined  plane 
to  a  particular  spot.  The  tires  are  propelled  by 
some  mysterious  force  to  the  same  spot;  as  the  two 
elements  coincide,  workmen  quickly  put  them  to 
gether.  In  a  long  room  the  bodies  are  slowly  ad 
vanced  on  moving  platforms  at  the  rate  of  about 
a  foot  per  minute.  At  the  side  stand  groups  of 
men,  each  prepared  to  do  his  bit,  their  materials 
being  delivered  at  convenient  points  by  chutes. 
As  the  tops  pass  by  these  men  quickly  bolt  them 
into  place,  and  the  completed  body  is  sent  to  a 
place  where  it  awaits  the  chassis.  This  important 
section,  comprising  all  the  machinery,  starts  at  one 
end  of  a  moving  platform  as  a  front  and  rear  axle 
bolted  together  with  the  frame.  As  this  slowly 
advances,  it  passes  under  a  bridge  containing  a 
gasoline  tank,  which  is  quickly  adjusted.  Far 
ther  on  the  motor  is  swung  over  by  a  small  hoist 


THE  AUTOMOBILE  185 

and  lowered  into  position  on  the  frame.  Presently 
the  dash  slides  down  and  is  placed  in  position 
behind  the  motor.  As  the  rapidly  accumulating 
mechanism  passes  on,  different  workmen  adjust  the 
mufflers,  exhaust  pipes,  the  radiator,  and  the  wheels 
which,  as  already  indicated,  arrive  on  the  scene 
completely  tired.  Then  a  workman  seats  himself 
on  the  gasoline  tank,  which  contains  a  small  quan 
tity  of  its  indispensable  fuel,  starts  the  engine,  and 
the  thing  moves  out  the  door  under  its  own  power. 
It  stops  for  a  moment  outside;  the  completed  body 
drops  down  from  the  second  floor,  and  a  few  bolts 
quickly  put  it  securely  in  place.  The  workman 
drives  the  now  finished  Ford  to  a  loading  platform, 
it  is  stored  away  in  a  box  car,  and  is  started  on  its 
way  to  market.  At  the  present  time  about  2000 
cars  are  daily  turned  out  in  this  fashion.  The 
nation  demands  them  at  a  more  rapid  rate  than 
they  can  be  made. 

Herein  we  have  what  is  probably  America's 
greatest  manufacturing  exploit.  And  this  demo 
cratization  of  the  automobile  comprises  more  than 
the  acme  of  efficiency  in  the  manufacturing  art. 
The  career  of  Henry  Ford  has  a  symbolic  signifi 
cance  as  well.  It  may  be  taken  as  signalizing  the 
new  ideals  that  have  gained  the  upper  hand  in 


186          THE  AGE  OF  BIG  BUSINESS 

American  industry.  We  began  this  review  of 
American  business  with  Cornelius  Vanderbilt  as 
the  typical  figure.  It  is  a  happy  augury  that  it 
closes  with  Henry  Ford  in  the  foreground.  Vander 
bilt,  valuable  as  were  many  of  his  achievements, 
represented  that  spirit  of  egotism  that  was  ram 
pant  for  the  larger  part  of  the  fifty  years  following 
the  war.  He  was  always  seeking  his  own  advan 
tage,  and  he  never  regarded  the  public  interest  as 
anything  worth  a  moment's  consideration.  With 
Ford,  however,  the  spirit  of  service  has  been  the 
predominating  motive.  His  earnings  have  been 
immeasurably  greater  than  Vanderbilt's;  his  in 
come  for  two  years  amounts  to  nearly  Vanderbilt's 
total  fortune  at  his  death;  but  the  piling  up  of 
riches  has  been  by  no  means  his  exclusive  purpose. 
He  has  recognized  that  his  workmen  are  his  part 
ners  and  has  liberally  shared  with  them  his  increas 
ing  profits.  His  money  is  not  the  product  of  specu 
lation;  Ford  is  a  stranger  to  Wall  Street  and  has 
built  his  business  independently  of  the  great  bank 
ing  interest.  He  has  enjoyed  no  monopoly,  as 
have  the  Rockefellers;  there  are  more  than  three 
hundred  makers  of  automobiles  in  the  United 
States  alone.  He  has  spurned  all  solicitations  to 
join  combinations.  Far  from  asking  tariff  favors 


THE  AUTOMOBILE  187 

he  has  entered  European  markets  and  undersold 
English,  French,  and  German  makers  on  their  own 
ground.  Instead  of  taking  advantage  of  a  great 
public  demand  to  increase  his  prices,  Ford  has 
continuously  lowered  them.  Though  his  idealism 
may  have  led  him  into  an  occasional  personal 
absurdity,  as  a  business  man  he  may  be  taken  as 
the  full  flower  of  American  manufacturing  genius. 
Possibly  America,  as  a  consequence  of  universal 
war,  is  advancing  to  a  higher  state  of  industrial 
organization;  but  an  economic  system  is  not  en 
tirely  evil  that  produces  such  an  industry  as  that 
which  has  made  the  automobile  the  servant  of 
millions  of  Americans. 


BIBLIOGRAPHICAL  NOTE 

THE  materials  are  abundant  for  the  history  of  American 
industry  in  the  last  fifty  years.  They  exist  largely  in 
the  form  of  official  documents.  Any  one  ambitious  of 
studying  this  subject  in  great  detail  should  consult, 
first  of  all,  the  catalogs  issued  by  that  very  valuable  in 
stitution,  the  Government  Printing  Office.  The  Bureau 
of  Corporations  has  published  elaborate  reports  on  such 
industries  as  petroleum  (Standard  Oil  Company),  beef, 
tobacco,  steel,  and  harvesting  machinery,  which  are 
indispensable  in  studying  these  great  basic  enterprises. 
The  American  habit  of  legislative  investigation  and 
trust-fighting  in  the  courts,  whatever  its  public  value 
may  have  been,  has  at  least  had  the  result  of  piling 
up  mountains  of  material  for  the  historian  of  Ameri 
can  industry.  For  one  single  corporation,  the  Standard 
Oil  Company,  a  great  library  of  such  literature  exists. 
The  nearly  twenty  volumes  of  testimony,  exhibits,  and 
briefs  assembled  in  the  course  of  the  Federal  suit  which 
led  to  its  dissolution  is  the  ultimate  source  of  material 
on  America's  greatest  trust.  As  most  of  our  other  great 
corporations  —  the  Steel  Trust,  the  Harvester  Com 
pany,  the  Tobacco  Company,  and  the  like  —  have  passed 
through  similar  ordeals,  all  the  information  the  student 
could  ask  concerning  them  exists  in  the  same  form. 
The  archives  of  such  bodies  as  the  Interstate  Commerce 

189 


190  BIBLIOGRAPHICAL  NOTE 

Commission  and  Public  Utility  Commissions  of  the  States 
are  also  bulging  with  documentary  evidence.  Thus  all 
the  material  contained  in  this  volume — and  much  more 
—  concerning  the  New  York  traction  situation  will  be 
found  in  the  investigation  conducted  in  1907  by  the  Pub 
lic  Service  Commission  of  New  York,  Second  District. 

American  business  has  also  developed  a  great  talent 
for  publicity.  Nearly  all  our  big  corporations  have 
assembled  much  material  about  their  own  history,  all 
of  which  is  public  property.  Thus  the  American  Tele 
phone  and  Telegraph  Company  can  furnish  detailed 
information  on  every  phase  of  its  business  and  history. 
Indeed,  one's  respect  for  the  achievements  of  American 
industry  is  increased  by  the  praiseworthy  curiosity  which 
it  displays  about  its  own  past  and  the  readiness  with 
which  it  makes  such  material  accessible  to  the  public. 
Despite  the  abundance  of  data,  there  is  not  a  great 
amount  of  popular  writing  on  these  subjects  that  has 
much  fascination  as  literature  or  much  value  as  history. 
The  only  book  that  is  really  important  is  Miss  Ida 
M.  Tarbell's  History  of  the  Standard  Oil  Company,  % 
vols.  (new  edition  1911).  Of  other  popular  volumes  the 
present  writer  has  found  most  useful  Herbert  N.  Cas- 
son's  Romance  of  Steel  (1907),  History  of  the  Telephone 
(1910),  and  Cyrus  Hall  McCormick:  His  Life  and  Work 
(1909);  J.  H.  Bridge's  Inside  History  of  the  Carnegie 
Steel  Company  (1903);  Henry  Ford's  Own  Story  as  told 
to  Rose  Wildes  Lane  (1917). 

For  Chapter  V,  the  author  has  drawn  from  articles 
contributed  by  him  in  1907-8  to  McClure's  Magazine 
on  Great  American  Fortunes  and  their  Making;  and  for 
Chapter  IV,  from  an  article  contributed  to  the  same 
magazine  in  1914,  on  Telephones  for  the  Millions. 


INDEX 


Acme  Oil  Company,  87 

Agricultural  machinery,  149-69 

Alabama,  steel  in,  77 

American  Bell  Telephone  Com 
pany,  114-15;  see  a/.vo  Amer 
ican  Telephone  and  Telegraph 
Company,  Bell  Company 

American  Bridge  Company,  81 

American  Speaking  Telephone 
Company,  111 

American  Steel  and  Wire  Com 
pany,  79,  81 

American  Sugar  Refining  Com 
pany,  170 

American  Telephone  and  Tele 
graph  Company,  upright  busi 
ness  methods,  92-93;  takes 
over  American  Bell  Company, 
115;  growth  of,  115;  bibli 
ography,  190;  see  also  Ameri 
can  Bell  Telephone  Company, 
Bell  Company 

American  Transfer  Company,  38 

Andrews,  Samuel,  associate  of 
Rockefeller,  S3,  35 

Appleby,  J.  F.,  inventor  of  twine 
binder,  154,  160 

Archbold,  J.  D.,  President  of 
Acme  Oil  Company,  37;  as 
sociate  of  Rockefeller,  42 

Armour  and  Company,  170 

Aspinwall,  William,  12 

Astor,  W.  B.,  10 

Automobiles,  171  ei  seq. 

Barnum,  P.  T.,  12 
Barrett,  J.  P.,  invents  telephone 
cable,  103 


Beach,  M.  Y.,  Wealthy  Men  of 
New  York,  10,  11 

Bell,  A.  G.,  inventor  of  telephone, 
88;  life,  93-94;  works  on 
"harmonic  telegraph,"  94- 
97;  invention  of  telephone,  97- 
98;  lectures  tj  finance  scheme, 
103;  returns  to  teaching  deaf- 
mutes,  113;  later  activities,  113 

Bell,  Mrs.  A.  G.,  92 

Bell  Company,  Vail  as  General 
Manager,  107-11;  trouble  with 
Western  Union,  111-13;  buys 
Western  Union  Telephone 
System,  113;  see  also  Ameri 
can  Bell  Telephone  Company, 
American  Telephone  and  Tele 
graph  Company 

Bennett,  Arnold,  quoted,  86-87 

Berkman  attacks  Frick,  72 

Berliner,  Emile,  invents  a  tele 
phone  transmitter,  101 

Bessemer,  Henry,  developed  steel 
manufacture,  61-62 

Birmingham  (Ala.),  steel  manu 
facture  in,  77-78 

Bishop,  Japhet,  12 

Bismarck,  Prince,  quoted,  153- 
154 

Bissell,  G.  H..  interest  in  refin 
ing  of  petroleum,  28-29 

Blake,  Francis,  invents  a  tele 
phone  transmitter,  101 

Boston,  telephones  in,  89 

Brewster,  Benjamin,  associate  of 
Rockefeller,  41 

Broadway  railroad  franchise, 
136-39 


191 


192 


INDEX 


Brooklyn  Rapid  Transit,  146 

Calhoun,  Patrick,  124 

Carnegie,  Andrew,  a  maker  of 
American  Steel  Age,  59; 
quoted,  60;  genius  of,  66-69; 
retires  from  business  life,  80; 
sells  interests  to  Morgan,  84 

Carnegie  Steel  Company,  76,  79 

Carty,  J.  J.,  improves  telephone, 
93,  102-03 

Chicago,  steel  production  in,  77; 
telephones  in,  89;  street  rail 
way  corruption,  125-26,  142- 
143,  144-45;  McCormick  es 
tablishes  factory  at,  182 

Choate,  J.  H.,  130 

City  government,  corruption  of, 
123-24;  see  also  Chicago,  New 
York  City 

Civil  War,  effect  on  industrial 
development,  13  et  seq. 

Cleveland,  G  rover,  131 

Cleveland,  oil  refining  center,  36; 
steel  production  in,  77 

Clifford,  George,  conducts  case 
for  Western  Union  against 
Bell  Company,  112 

Coal,  importation  in  1865,  4; 
deposits  in  U.  S.,  4-5 

Coggeswell,  W.  L.,  12 

Coleman,  Pittsburgh  steel  mag 
nate,  66 

Colorado  Fuel  and  Iron  Com 
pany,  57,  77 

Columbia  Conduit  Company,  39 

Competition  in  1865,  7-9 

Conkling,  Roscoe,  counsel  for 
legislative  investigation  of 
Broadway  franchise,  136,  138 

Conneaut  (0.),  terminus  for  ore 
shipping,  75;  Carnegie  builds 
steel  plant  at,  82 

Connellsville  coal,  71-72 

Cooper,  Peter,  12 

Copper  importation  in  1865,  4 

Cudahy  Packing  Company,  170 

Daimler,  Gottlieb,  inventor  of 
gasoline  engine,  174 


Deering,  William,  159-60,  168 
Deering  Company,  William,  167 
Dolan     helps     combine    public 

utilities,  121 

Doolittle,  T.  B.,  invents  hard- 
drawn  copper  wire,  102 
Drake,  E.  L.,  drills  first  oil  wells, 

29-30 

Duryea,  C.  B.,  constructs  auto 
mobile,  178 

Edison,  T.  A.,  devises  telephone 
transmitter,  101,  112;  invents 
incandescent  light,  121 

Elkins,  W.  L.,  helps  combine 
public  utilities,  121;  in  Phila 
delphia,  123,  129,  134;  con 
nection  with  Broadway  fran 
chise,  138;  in  Chicago,  142, 
143,  145 

Emery,  Lewis,  Jr.,  builds  pipe 
lines,  55 

Empire  Transportation  Com 
pany,  39 

Everett,  P.  M.,  discovers  iron 
in  Minn.,  63-64 


Federal  Steel  Company,  81 

Flagler,  H.  M.,  associate  of 
Rockefeller,  35,  42 

Flower,  R.  P.,  Governor  of 
N.  Y.,  123-24 

Ford,  Henry,  wealth,  172;  life 
and  achievements,  176  et  seq. 

Forests,  beginning  of  exploita 
tion,  3 

Frick,  H.  C.,  a  maker  of  Amer 
ican  Steel  Age,  59,  66;  personal 
characteristics,  70-71;  "coke 
king"  of  Connellsville,  71- 
72;  receipts  in  1900,  80 

Fullgraff,  "boodle  alderman"  in 
New  York  street  railway  cor 
ruption,  137 

Gates,  J.  W.,  introduces  wire 
fencing,  78-79;  discusses  st'eel 
situation  with  Morgan,  84 


INDEX 


193 


Glessner,  J.  J.,  establishes  fac 
tory  for  self-binders,  167,  168 

Goodyear,  Charles,  discovers 
secret  of  vulcanized  rubber, 
174-75 

Gould,  G.  J.,  83 

Gray,  Elisha,  perfects  "harmonic 
telegraph,"  95;  invents  tele 
phone,  96-97 

Gulf  Refining  Company,  56 

Haggerty,  John,  12 

Hanua,  Mark,  123 

Harmony,  Peter,  12 

Haupt,  General  Herman,  builds 
pipe  line  for  Tidewater  Com 
pany,  39 

Haynes,  Ellwood,  constructs 
automobile,  178 

Homestead  strikes,  72,  73 

Hostetter  builds  pipe  line  for 
Columbia  Conduit  Company, 
39 

Hubbard,  G.  G.,  interest  in  Bell's 
experiments,  94;  refuses  at 
first  to  finance  telephone,  97; 
places  Vail  as  General  Man 
ager  of  Bell  Company,  106-07; 
later  life,  113 

Hudson  River  Railroad,  23,  24 

Hummings,  Rev.  Henry,  sug 
gests  improvements  in  tele 
phone,  101 

Immigration  after  Civil  War,  14 

Industrial  combinations,  Western 
Union  Telegraph  Company,  9; 
railroads,  9,  23-24;  Standard 
Oil  Company,  25,  36,  52-54; 
United  States  Steel  Corpora 
tion,  84-85;  International  Har 
vester  Company,  153,  167- 
169;  see  also  names  of  cor 
porations 

International  Harvester  Com 
pany,  153,  167-69 

Interstate  Commerce  Act  (1887), 
48 

Iron,  in  U.  S.,  5;  in  Minn.,  68-64 

13 


Jennings,    Oliver,    associate    of 

Rockefeller,  41 
Johnstown  (Pa.),  steel  production 

at,  77 
Joliet  (111.),  steel  production  at, 

77 
Jones,  Captain  Bill,  early  maker 

of  steel,  66,  68 
Jones,  W.  H.,  manufacturer  of 

self-binders,  167,  168 

Kansas  City,  telephones  in,  89 

Kelly,  William,  discovers  "  Besse 
mer  process"  of  making  steel, 
61,62 

Kemble,  W.  H.,  plays  part  in 
public  utilities  corruption,  125, 
138 

Kier,  S.  M.,  exploits  petroleum 
as  medicine,  27-28 

Kloman,  Pittsburgh  steel  mag 
nate,  66 

Land,  beginning  of  exploitation, 

3 

Law,  George,  12 
Lenox,  James,  11 
London  Times,  comments  on 

invention    of    telephone,    87; 

ridicules  McCormick  harvester, 

166 
Lorain  (O.),  steel  production  in, 

77 
Los  Angeles,  telephones  in,  89 

McCandless,  Pittsburgh  steel 
magnate,  66 

McCormick,  C.  H.,  invents 
reaper,  149,  150;  life  and 
achievement,  154-57;  as  a 
business  man,  160-64;  har 
vester  exhibited  at  London 
Exposition  (1851),  166;  death 
(1884),  167;  growth  of  busi 
ness,  169 

McCormick,  Robert,  father  of 
C.  H.,  155-56 

McKay  sewing  machine,  16 

McQuade,  A.  J.,  137 


194 


INDEX 


Manufactures,     in     1865,     5-7; 
effect  of  Civil  War  on,  16-17; 
in  early  20th  century,  171 
Marsh,  C.  W.,  invents  improve 
ment  to  reaper,  154,  158 
Mercer,  J.  P.,  City  Treasurer  in 

Philadelphia,  127 
Mesaba  iron  ore  range,  57 
Metropolitan     Street     Railway 

Company,  139  et  seq. 
Metropolitan  Traction  Company 

139,  141  (note) 

Minnesota,  iron  fields  of,  63-65 
Monopolies,  see  Industrial  com 
binations 

Morgan,  J.  P.,  81,  84,  168 
Morris  and  Company,  170 
Municipal  government,  see  City 
government 

National  Packing  Company,  170 
National  Tube  Company,  81,  82 
New    York    Central    Railroad, 
under  Vanderbilt,  23-24;  re 
bates  granted  by,  45-48 
New  York  City,  telephones  in, 
88-89;    street   railways,    119; 
street  railway  corruption,  135- 

Northcliffe,  Lord,  telephone  de 
monstration,  86 

Oil,  first  "oil  gusher,"  4;  "Oil 
Creek,"  26-27;  used  as  medi 
cine,  27-28;  Bissell's  project, 
28-29;  Silliman's  report,  28; 
"Drake's  folly,"  29;  rush  to 
oil-fields,  30;  commercial  im 
portance,  31;  in  Middle  West 
and  West,  56;  see  also  Standard 
Oil  Company 

Osborne,  D.  M.,  manufactures 
iarm  machinery,  167 

Page,  Dr.  C.  C.,  article  on  theory 

of  sound,  96 

Pennsylvania,  oil  in,  26  et  seq. 
Pennsylvania  Railroad,  rebates 


granted  by,  44-16;  monopoly 
m  and  out  of  Pittsburgh,  83 

Perkins,  G.  W.,  81,  168 

Petroleum,  see  Oil 

Philadelphia,  telephones  in,  89; 
public  utilities,  121  et  seq. 

Phipps,  Henry,  associate  of 
Carnegie,  59,  66,  69-70;  re 
ceipts  in  1900,  80 

Pittsburgh  as  steel  center,  74-75 

Public  utilities,  119  et  seq. 

Public  Utility  Commissions,  148 

Pupin,  M.  I.,  invents  "Pupin 
coil,"  93,  103-05 

Pure  Oil  Company,  55,  56      • 

Railroads,  of  Civil  War  days,  2; 
combinations,  9,  23-24;  see 
also  Vanderbilt 

Rebates,  to  Standard  Oil  Com 
pany,  43-44,  48;  to  South 
Improvement  Company,  45- 
46;  to  Carnegie,  76 

Heis,  Philip,  telephone  experi 
ments  by,  96 

Rockefeller,  J.  D.,  31  et  seq. 

Rogers,  H.  H.,  associate  of 
Rockefeller,  42 

Rural  free  delivery,  90 

Ryan,  T.  F.,  effects  combinations 
of  public  utilities,  121 ;  in  Tam 
many  Hall,  123;  buys  Chicago 
railway  system,  126;  life  and 
character,  132-34;  connection 
with  New  York  street  railways, 
137,  138 

Salt  manufacture,  27-28 
Sanders,  Thomas,  patron  of  Bell, 
94,  95;  refuses  at  first  to 
finance  telephone.  97;  with 
draws  from  telephone  com 
pany,  113 

Schwab,  C.  M.,  80;  associate  of 
Carnegie,  59,  66;  personal  char 
acteristics,  70-71;  reorganizes 
Homestead  Works,  72-73; 
made  President  of  Carnegie 
Company,  73;  to  be  manager 


INDEX 


195 


Schwab,  C.  M. — Continued 
at    Conneaut,    83;    discusses 
steel  situation  with  Morgan, 
83-84 

Schwarzschild  and  Sulzberger, 
170 

Scott,  T.  A.,  President  of  Penn 
sylvania  Railroad,  44,  49,  66; 
makes  Carnegie  private  secre 
tary,  67;  partner  of  Carnegie, 
76 

Scribner,  C.  E.,  inventor  of 
multiple  switchboard,  93,  103 

Selden,  C.  B.,  "inventor  of  the 
modern  automobile,"  175 

Seward,  W.  H.,  quoted,  165 

Sharp,  Jacob,  connection  with 
New  York  street  railway  cor 
ruption,  135-36 

Shinn,  Pittsburgh  steel  magnate, 
66 

Shipbuilding,  3 

Shoe  manufacture,  6, 16, 171 

Silliman,  Benjamin,  Jr.,  report 
on  petroleum  analysis,  28 

South  Improvement  Company, 
44-47 

Sprague,  F.  J.,  constructs  urban 
trolley,  121 

Standard  Oil  Company,  evolution 
typical  of  economic  change, 
3;  of  Ohio,  in  1877,  25;  incor 
porated  (1870),  36;  develop 
ment,  36  et  seq. i  methods  of 
marketing  oil,  50-51;  organ 
ization,  52-53;  Standard  Oil 
Trust,  53;  of  N.  J.,  53-54; 
combination  dissolved,  54; 
financial  power  of,  57;  bibli 
ography,  189,  190;  see  also 
Rockefeller 

Steel,  increased  use  of,  58-59; 
growth  of  industry  in  America, 
60-61,  75-78;  reasons  for  suc 
cess  in  America,  73-74;  bibli 
ography,  189,  190;  see  also 
Carnegie 

Stetson,  F.  L.,  invents  "holding 
company."  139 


Stewart,  A.  T.,  12 

Stewart,  Pittsburgh  steel  mag 
nate,  66 

Stone,  Amasa,  associate  of  Rocke 
feller,  41 

Street  railways,  see  Chicago, 
New  York  City 

Sumner,  W.  G.,  130 

Swift  and  Company,  170 

Tammany  Hall,  123,  131,  133 

Telephone,  86  et  seq.\  bibli 
ography,  190 

Texas  Refining  Company,  56 

Thompson,  J.  E.,  66 

Tidewater  Company,  40 

Tilden,  S.  J.,  130    * 

Tobacco  Trust,  170-71,  189 

Transportation,  effect  of  Civil 
War  on,  15 

Trusts,  see  Industrial  combina 
tions 

Tweed,  W.  M.,  130 

United  Pipe  Line  Company,  39 
United    States,    economic    con 
ditions  in  1865,  1  et  seq. 
United  States  Steel  Corporation, 
3,  84-85 

Vail,  Stephen,  107 

Vail,  T.  N.,  General  Manager  of 

Bell  Company,  107  et  seq. 
Vanderbilt,  Cornelius,  11,  18-24, 

49,  186 
Vanderbilt,  W.  H.,  quoted,  41- 

42 
Vandervoort,     Pittsburgh    steel 

magnate,  66 
Van   Syckel,   Samuel,   discovers 

use  of  oil  pipes,  30 

Watson,  T.  A.,  associate  of  Bell, 
97,  98,  106,  113-14 

Wealth  in  1855,  distribution  of, 
10-11;  sources  of,  11-12 

Western  Electric  Manufacturing 
Company,  114 

Western  Union  Telegraph  Com 
pany,  9,  88, 101, 111-14 


196 


INDEX 


Western  Union  Telephone  Com 
pany,  113 

White,  Chief  Justice  E.  D.,  ren 
ders  Standard  Oil  decision,  54 
Whitney,  Eli,  154 
Whitney,  Stephen,  10-11 
Whitney,  W.  C.,  helps  combine 
public  utilities,  121;  in  Tam 
many  Hall,  123;  buys  Chicago 
railway  system,  126;  life  and 
activities,  130-32;  connection 
with  public  utilities  corruption, 
134,  137,  138,  139,  146-47 
Widener,  P.  A.  B.,  helps  combine 
public  utilities,  121;  in  Phila 


delphia,  123,  134;  personal 
characteristics  and  life,  127- 
129;  part  in  New  York  street 
railway  corruption,  138;  in 
Chicago,  142,  143,  145 
Withington,  C.  B.,  inventor  of 
self-binder,  154,  159 


Yerkes,  C.  T.,  helps  combine 
public  utilities,  121 ;  in  Chicago, 
123,  125-26,  134,  143,  144- 
145;  operations  in  London,  126 

Youngstown  (O).,  steel  produc 
tion  at,  77 


THE  UNIVERSITY  LIBRARY 
UNIVERSITY  OF  CALIFORNIA,  SANTA  CRUZ 

This  book  is  due  on  the  last  DATE  stamped  below. 


APR  26  19B7 

MAY  1  0  1967 
DEC  13  1967 

MOV  7    1973 


3  2106  00084  4461 


